Does corporate governance impact on the sustainable return of IPOs? A comparative analysis of China and New Zealand IPOs listed between 1999 and 2004
Wang, G. (2013). Does corporate governance impact on the sustainable return of IPOs? A comparative analysis of China and New Zealand IPOs listed between 1999 and 2004 (Thesis, Doctor of Philosophy (PhD)). University of Waikato, Hamilton, New Zealand. Retrieved from http://hdl.handle.net/10289/8117
Permanent Research Commons link: http://hdl.handle.net/10289/8117
This thesis examines the impact of corporate governance practices on the short and longer-term sustainable returns of initial public offerings (IPOs) in China and New Zealand. In particular, the analysis focuses on the Shanghai, Shenzhen and New Zealand exchanges, providing a comparison between them. The closer trade and economic relations between China and New Zealand and the increasing immigration to New Zealand of relatively well-off Chinese makes the study topical. Different political and cultural settings may give rise to differing relationships between IPO success and governance in these three markets and this will promote some interesting implications. Corporate governance involves regulatory and market mechanisms, and the roles and relationships between a company’s management, its board, its shareholders and other stakeholders. IPOs are very important for investors, stock markets and economic growth. The relationship between corporate governance mechanisms and IPO performance has received attention in studied by the literature. The bulk of prior research focuses on larger and more developed economies. There is an increasing volume of literature relating to Chinese IPOs but none have focused on this key issue of IPO performance and the corporate governance structures of the particular companies. New Zealand by comparison to China is a small economy, small population and has few IPOs. However, China has become New Zealand’s second largest trading partner since 2008 and China became one of the major sources of immigrants to New Zealand from late 1990s. This thesis makes an important contribution to knowledge demonstrating that the short-term IPO performance is associated with different corporate governance attributes to those apparent for long-term performance of IPOs. The use of a wide range of governance variables for the analysis as compared with prior studies provides greater confidence in the findings. The longer time period, up to 11 years, used in this study is helpful in reviewing the longer-term sustainable IPO performance. China is the fastest growth economy in the world with rapidly developing stock markets. New Zealand, on the other hand, is a mature economy with a small stock market. The quality of data and analysis for two such very different economics provides an opportunity for careful diagnostic and specification testing. In this study a more robust empirical analysis, extending the commonly used OLS approach, through several panel data methods of generalised least square, and generalised method of moment models are explored. The study uses data from Shanghai, Shenzhen and New Zealand stock exchanges, covering the IPOs listed from 1999 to 2004. Those data are secondary data collected from the websites of the three stock exchanges, NZX Deep Archive, CSMAR database and individual companies’ annual reports. The study includes an extensive range of governance variables, including board size, board demographics, board leadership, board education, and board evaluation variables. There are three long-term dependent variables and three short-term dependent variables. There are a group of control variables. Various tests and suitable regression models are used to find that relationship between corporate governance mechanisms and the short- and long-term performance of IPOs on three exchanges. Several diagnostic tests including serial correlation test, over-identification test, and joint significance test are also used to check the validity of the regressions. The thesis finds that the panel data and cross sectional regressions explain the long and short-term IPO performance well on the Shanghai Stock Exchange. The results indicate that the panel data regressions explain the long-term IPO performance well, but the cross sectional regressions do not have acceptable explanatory power for the short-term IPO performance on the Shenzhen Stock Exchange. In New Zealand the panel data regressions explain the long-term IPO performance well, but the cross sectional regressions do not contribute a useful explanation for the short-term IPO performance. This thesis contributes a number of important implications. The commonality of corporate governance variables associated with successful performance has implications for companies preparing to list, exchanges arresting companies with listing, investors looking for successful listings and policy makers wanting an efficient capital market. The difference in variables similarly provides insight for companies, exchanges, investors, and policy analysts.
University of Waikato
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