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Accounting Performance Inflated by Private Equity before IPOs: Evidence from Chinese Firms

Bo, Hong and Xu, Boying (2015) 'Accounting Performance Inflated by Private Equity before IPOs: Evidence from Chinese Firms.' In: Cumming, Douglas and Firth, Michael and Hou, Wenxuan and Lee, Edward, (eds.), Sustainable Entrepreneurship in China: Ethics, Corporate Governance, and Institutional Reforms. USA: Palgrave Macmillan, pp. 127-157.

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Abstract

We examine 329 Private Equity (PE) transactions received by Chinese listed nonfinancial firms during 2000-2011 to reveal how China’s PE investment differs from that elsewhere. We document that (1) the governance role of PE, although widely documented based on firms in mature financial markets, is not important for Chinese PE recipient firms; (2) PE funds are used by Chinese recipient firms as a means to boost short-term accounting performance before IPOs. This pumping up effect exits especially for small private firms listed on China’s newly established Small and Medium Enterprises (SME) board and the ChiNext board. Our result suggests that the Chinese IPO market has been used as a speculative venture by PE investors.

Item Type: Book Chapters
SOAS Departments & Centres: Faculty of Law and Social Sciences > School of Finance and Management
ISBN: 9781137412522
Depositing User: Hong Bo
Date Deposited: 31 May 2016 07:07
URI: http://eprints.soas.ac.uk/id/eprint/22539

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