The value of political connections when accessing the IPO market
In this study we examined the value of political connections in firms' access to the IPO market using a sample of Chinese IPO applications from 2006 to 2010. We found a positive relationship between political connections and the probability of IPO approval, and this relationship is strengthened in entrepreneurial firms and weakened in those firms controlled by the state. We further provide evidence that entrepreneurial firms with a disproportional ownership structure and without high technology benefit more from political connections. Our additional tests showed that entrepreneurial (state) firms with political connections also performed better (worse) than firms without. We argue that in emerging markets where the institutional legal system is weak, the value of political connections exists not only in private financial financing markets, but also in public equity markets.