The Empirical Analysis Of The Effect Of The Quality Of Corporate Governance On Initial Public Offerings Based On Law And Finance Perspective

Law and finance studies the nexus of a country’s legal system and financialdevelopment：the more perfect the legal system，the higher the level of investorprotection，then the country’s financial development is higher and the economic isbetter．But，the legal construction is a long-term project，and it has a character ofincompleteness which can not contain all about investor protection in the form oflegislation． In term of a specific country， all companies face the same legalenvironment，so the only mechanisms are not adequate．There must be an alternativemechanism to compensate for the legal system in deficiencies and defects of investorprotection．In part of corporate operations，companies can choose corporate governanceto release the signal of valuing investors’ interests．In part of regulatory policies，government regulators show their cautious attitude to companies and investors throughthe regulation of access to IPO market．The development of securities market andeconomy of China in the past30years can fully reflect the important role of alternativemechanisms：(1)With the quota system of stock issuance，China Securities RegulatoryCommission(CSRC) has IPO distribution right，and this mechanism plays a role ofpromoting the development of our securities markets；(2)The governance mechanism onthe basis of reputation and relationship and the informal financing support our rapideconomic growth．This context believes that corporate governance can substitute for legal system--theissuer would choose high-quality corporate governance to convey their concern aboutthe interests of outside investors．And if CSRC focuses on minority shareholders，itmust send out the signal of focusing on the corporate governance of pre-IPO companiesto IPO committee which is selected by CSRC．As a result，companies with high-qualitycorporate governance are more likely to be accepted and obtain listing qualification．Of the specific research，we choose the pre-IPO companies examined by8thto12thIPO committee as samples，construct corporate governance index containing ownershipstructure，board structure，related party transaction and information disclosure quality，use the logistic model to do regression analysis about the relationship between the indexand the probability being accepted，and finally obtain the following conclusions：(1)The higher-quality companies are more likely to be issued．Because it meansmore effective corporate governance mechanism which can constrain the private interests of controlling right and therefore reduce infringement on minorityshareholders．(2)The higher the board and operational independence，the greater the probabilitythat the pre-IPO companies be issued．Because higher independence results in lessopportunities and greater cost of grabbing outside shareholders．(3)Differences in quality of corporate governance intend to have a significant effectto private issuers：the higher the corporate governance quality is，the more likely thecompanies would be issued． But this effect is not significant for state-ownedcompanies．(4)The companies with higher quality of corporate governance performs betterafter they are listed，and this effect is statistically significant．Our innovation is that domestic research about government regulation as ansubstitution of investor legal protection is relatively few，and we construct an indexinstead of single fact to reflect companies governance situation．Obviously，this context has many shortcomings．Firstly，although we controlledvariables as much as possible，we still troubled by the endogeneity problem caused byomitted variables．Secondly，the corporate governance index is comprised of10indicators covering a small range of ownership， board structure， related partytransactions and information disclosure quality．In addition，this context does notconsider the composition of IPO committee．Actually，each committee is comprised ofaccountants，lawyers，investment managers from securities and fund companies andgovernment officials， so everyone’s judgments would differ due to differentbackground，expertise and experience．...