Governance Structure and Operating Performance of Initial Public Offerings in China: A New Explanation

We investigate the potential reason of decline in operating performance of Chinese initial public offerings (IPO), using a data set of 738 firms for the period 1996-2000. We find that, growth rate of investment and sales are unrelated with governance structure, and Chinese IPOs have had better post-issue performance may be more likely to invest. We also find relationship between identity of ownership and post-issue operating performance. These findings suggest that the agency hypothesis that governance change may induce an inefficient investment and sales doesn´t work well in Chinese IPOs, and the motivation for going public is fairly to finance investment. Data envelopment analysis (DEA), a non-parametric frontier technique, is introduced to estimate the potential relation among governance structure, investment and sales growth, instead of using econometric methods only