Purpose – To examine whether and how the different levels of regional economic incentives would have an effect on underwriters’ market share in general. Design/methodology/approach – Drawing on Chinese IPO firms during the period 2006-2016, this study examines the impact of different levels of regional economic incentives on underwriters’ market share. Findings – The authors find thatregional economic incentives have a positive impact on underwriters’ market share and that local economic incentives have a significantly strongerimpact than central economic incentives. Furthermore, the authors find that IPO firms with underwriters driven by regional economic incentives experience worse post-IPO performance than firms with underwriters driven by central economic incentives, which do not experience a significant decline in post-IPO performance. Originality/value – Taken together, the authors’ findings are consistent with the notion that performance assessment motivates officials at various levels of government to bring companies in their jurisdiction to the IPO market prematurely. In addition, the results indicate that central economic incentives play a significantrole in driving China’s macroeconomic development and market-oriented system reforms. As such, they are one of the major driving forces behind China’s market-oriented system reforms.

This paper examines the interactive effect of private equity (PE) and excess control rights on the process of firms’ going public. We find that firms with high excess control rights have more earnings management before IPO, and they are more likely to seek PE investors especially when the earnings management is high. We further show that the involvement of PE investors increases the probability of the firms’ IPO application being approved by the regulators in firms with high excess control rights. However, PE backed firms with high excess control rights are found to have a higher IPO fee, lower initial returns and lower long term post-IPO performance. We argue that in emerging markets where the protection of minority shareholders is weak and the economy is dominated by relationship and networks, ultimate owners have a strong incentive to have PE investors help them access the IPO market at the expense of minority shareholders’ interests, especially when they have excess control rights. In fact, instead of playing a monitory role, PE investors actually conspire with the ultimate owners to exploit minority shareholders’ interests and both PE investors and controlling shareholders become big winners, while minority shareholders are the only losers in the IPO process.