Competitive Effects of IPOs: Evidence from Chinese Listing Suspensions

Theory suggests that initial public offerings (IPOs) can adversely impact listed firms, both directly by increasing intraindustry competition, and indirectly by completing related asset market spaces. However, the endogeneity of individual IPO activity hinders testing these channels. This paper exam...

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Bibliographic Details
Published in:Journal of money, credit and banking credit and banking, 2024-12, Vol.56 (8), p.2137-2169
Main Authors: PACKER, FRANK, SPIEGEL, MARK M.
Format: Article
Language:English
Subjects:
asset space
Assets
China
Companies
competition
initial public offerings
Specification
Suspension
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Summary:Theory suggests that initial public offerings (IPOs) can adversely impact listed firms, both directly by increasing intraindustry competition, and indirectly by completing related asset market spaces. However, the endogeneity of individual IPO activity hinders testing these channels. This paper examines listing suspensions in China in a panel specification that accounts for macro‐economic and financial conditions, isolating the firm‐level IPO impact. We identify the competitive impact of listing suspensions through the value share of postponed firms in the IPO queue in their industry, and asset‐space competition by firms' historical covariance with a synthetic portfolio of listed firms with the IPO queue industry mix at the time of suspension. Our results support the predicted IPO effects through both channels. We also document heterogeneity in IPO effects. Stronger firms, measured through a variety of proxies, benefit less from the suspension news. These results are robust to a battery of sensitivity tests.
ISSN:0022-2879
1538-4616
DOI:10.1111/jmcb.13043