What Determines the Market Share of Investment Banks in Chinese Domestic IPOs?

In this paper, we empirically examine how government forces vis-à-vis market forces have affected the market share of investment banks in Chinese domestic IPOs over the period 1995–2010. Before 2005, only political connections significantly positively influenced the market share of investment banks. After 2005, the effect of political connections declined, while a low evaluation standard on IPO candidates and low underwriting fees now also significantly enhance market share. We explain these findings by the pro-competitive, yet partial changes that were introduced in the regulatory framework for IPOs, thereby emphasizing the need for a delicate policy coordination in marketization reforms