Uncertainty of political subsidy, heterogeneous beliefs, and IPO anomalies

  • Bo LiuEmail author
  • Kemin Wang
Original Research


This paper focuses on financial subsidies introduced by the Chinese government to benefit IPO firms. Because of high uncertainty, subsidy information deepens the divergence of opinions regarding IPO firm value among investors, and the IPO issuers accordingly raise their offer prices. This paper finds that the divergence of analyst forecasts is greater and the offer prices are higher when issuers have received higher subsidies before listing. Moreover, the decrease in investors’ disagreement and market performance after listing is also serious. Compared to state-owned issuers, the influence of subsidy information on heterogeneous beliefs, offer prices, and long-run performance of non-state-owned issuers is higher. Overall, this paper extends the research regarding the pricing of political information by following heterogeneous beliefs theory. Moreover, this paper develops a new IPO pricing framework under heterogeneous beliefs.


Heterogeneous beliefs IPO anomalies Subsidy 

JEL Classification

G18 G24 G41 



Bo Liu gratefully acknowledges financial support from the Fundamental Research Funds for the Central Universities (2017QNA289). Kemin Wang gratefully acknowledges financial support from the National Natural Science Foundation of China (71272072, 71572042).


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Copyright information

© Springer Science+Business Media, LLC, part of Springer Nature 2018

Authors and Affiliations

  1. 1.School of ManagementZhejiang UniversityHangzhouChina
  2. 2.Capital Market Research CenterZhejiang UniversityHangzhouChina
  3. 3.School of ManagementFudan UniversityShanghaiChina

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