Journal of Political Institutions and Political Economy > Vol 4 > Issue 1

Political Alignment and the Allocation of Stock Market Resources in China

Yishuang Li, Department of Politics, New York University, USA, , Zhenhuan Lei, Department of Political Science and La Follete School of Public Affairs, University of Wisconsin-Madison, USA and Visiting Scholar, China Center for Economic Research, National School of Development, Peking University, China,
Suggested Citation
Yishuang Li and Zhenhuan Lei (2023), "Political Alignment and the Allocation of Stock Market Resources in China", Journal of Political Institutions and Political Economy: Vol. 4: No. 1, pp 51-80.

Publication Date: 27 Feb 2023
© 2023 Y. Li and Z. Lei
Bureaucracy,  Comparative political economy,  Political economy,  Intergovernmental relations,  Regulation,  Public economics
BureaucracyChinaDistributive PoliticsInitial Public OfferingPolitical AlignmentStock Market


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In this article:
Background and Theoretical Arguments 
Research Design 
Political Alignment and IPO Approval 
The Provincial Influence through Information 
The Consequences of Alignment-Induced IPO Approvals 


Earlier research shows that national leaders often distribute public resources to advance their private interests. This line of research often assumes that subnational governments are merely passive receivers of the central government’s distributive policies. We question this view by studying how intergovernmental relations between cities and provinces affect the allocation of opportunities for initial public offerings (IPOs) in China. Although the China Securities Regulatory Commission (CSRC) is the only central agency that reviews IPO applications based on efficiency criteria, our analysis of IPO applications between 2004 and 2016 shows that provinces can help politically aligned cities obtain more IPOs. Further results based on a novel dataset on the CSRC’s justifications for rejections show that provincial governments influence the CSRC’s decision by hiding unfavorable information from the CSRC if the applicant’s mayor is politically aligned with the province. These IPO approvals, in return, improve mayors’ promotion prospects.