Organization and Strategy Seminar（2017-01）

Topic：Late-Stage Private Equity Investment as a Non-Market Strategy: Evidence from Chinese pre-IPO Firms

Speaker:Yu Zhang,China Europe International Business School

Time: Friday, 3 March, 10:00-11:30 am

Location: Room 217 , Guanghua Building 2

Abstract:

        This paper explores the use of late-stage private equity investments by pre-IPO firms as a non-market strategy. We argue that in a heavily regulated equity-financing market, late-stage private equity investors can help pre-IPO firms to pass the regulatory barriers, especially for those with weaker quality. However, such use of non-market strategy is not free, as private equity investors may ask for a rent for such favor. Using manually-collected information about ownership changes from China’s IPO application filings, we find that over a third of firms receive late-stage private equity investment and subsequently halve rejection rates for IPO applications, compared to firms without PE investment. Those PE investors are then rewarded with 9.5 times return over a 14-month period for an average deal. Further tests rule out possible alternative explanations for extraordinary PE returns, such as financing, selection/certification, and managerial improvement.

Introduction:

        Dr.Yu Zhang is AssistantProfessor ofManagement at China Europe International School of Business (CEIBS).Dr. Zhang received his PhD in Management from INSEAD. Prior to joining CEIBS, he was Assistant Professor of Strategy at the Paul Merage School of Business, UC Irvine, where he taught business strategy for the MBA and undergraduate students. His teaching interests include Strategic Management, Industry and Competitive Analysis, and Corporate Governance.

        Dr.Zhang’s research focuses on the interaction between strategy and capital markets.His research has been published in top-tier journals such as theAcademy of Management Journal,Strategic Management Journal,andOrganization Science.He has been invited to present his research in leading business schools in Asia, Europe and North America, and to give keynote speech on leading industrial conferences such as theNACD (National Association of Corporate Directors) Spring Forum. He also serves on the editorial board of the Strategic Management JournalandAcademy of Management Perspectives.

        Dr.Zhang has won Celebration of Teaching Dean’s Honoree Award from UC Irvine, Best Symposium Award from the Academy of Management, and Best PhD Student Paper Award from Strategic Management Society.His research on the role of corporate governance in regulating the impact of earnings pressureon firm strategy won the inauguralBlackRock/NACD Global Challenge for Innovation in Corporate Governancein 2013.

        For more information about Dr. Zhang, please visit://www.ceibs.edu/zhang-yu

        Your participation is warmly welcomed!