Loading...
Please wait, while we are loading the content...
Similar Documents
Related Party Transactions , Expropriation and Post-IPO Performance – Chinese Evidence
| Content Provider | Semantic Scholar |
|---|---|
| Author | Cheng, Peng Chen, Jianping |
| Copyright Year | 2006 |
| Abstract | This study provides evidence that Chinese IPOs (Initial Public Offerings) report a sharp decline in the post-IPO operating performance relative to the pre-IPO level. We find that related party transactions (RPTs) with controlling shareholders have significant effects on IPO operating performance. We divide RPTs into two types: loan RPTs and operating RPTs (i.e. non-loan RPTs). Our findings show that the pre-IPO industry-adjusted operating performance is positively associated with the size of contemporaneous operating RPTs at the same year; moreover, controlling shareholders barely borrow funds from their IPO subsidiaries in the pre-IPO year. However, in the post-IPO period, the positive relation between IPO operating performance and contemporaneous operating RPTs (with controlling shareholders) fades away. Importantly, controlling shareholders begin to expropriate IPO subsidiaries by obtaining a large amount of cash loans with preferential terms, which is negatively associated with post-IPO industry-adjusted operating performance of listed subsidiaries. We argue that controlling shareholders structure a large percentage of operating RPTs to artificially boost revenues and/or profits of their IPO subsidiaries in the pre-IPO period. However, controlling shareholders discontinue this RPT-based earnings manipulation practice. Furthermore, controlling shareholders begin to expropriate IPO subsidiaries, primarily in return for profits and/or resources transferred into the IPO subsidiaries in the pre-IPO period. Finally, we find that state-controlled IPO firms with a highly concentrated ownership structure and a board of directors less independent from controlling shareholders are more likely to be expropriated by controlling shareholders in the post-IPO period via related loans. |
| File Format | PDF HTM / HTML |
| Alternate Webpage(s) | https://efmaefm.org/0EFMSYMPOSIUM/2007/papers/peng.pdf |
| Language | English |
| Access Restriction | Open |
| Content Type | Text |
| Resource Type | Article |
