PORC Member, IPO Success And Operating Return

Proper allocation of capital to the company with good prospect ofgrowth means a lot to the healthy and long-term development of capitalmarket. Public Offering Review Committee members (PORCM) make votesto decide whether the company can finance from the stock market byjudging its submitted material, such as the audited financial statements. Sowhether PORCM make the right decision that let the company with goodgrowth potentiality go to IPO is very important. The capability to judge thecompany’s submitted material and the unbiased attitude to make votes arethe main two factors that can affect whether the proper company goes toIPO.My study focused on those PORCMs, I categorize PORCMs into threecategories after analyzing their incentives to making biased and unbiasedvotes based on the rent-seeking hypothesis and reputation hypothesis. Thesample is those applying to be listed on the main board, small&medium-sized plate and growth enterprise market in the period of2004to2011. Onecompany and one PORCM who review that company is the observation cell.Then I make the regression to find the impact of those three categories onthe IPO pass result and the accounting performance and market performanceafter they are listed. The regression results are consistent with the rent-seeking theory.So having the experts from the CPA firms, law firms, sponsorinstitutions to be one of PORCM may should be blamed or suspect whenfinancial fraud to apply IPO are detected afterwards. One way to eliminatethe negative effect is to lower the times of having experts from one intermediate institution to be PORCM.