Test CSRC's Ability to Select Firms for IPO and Public Offering

In China, all applications for IPO and listing on stock exchanges must be approved by China Securities Regulatory Commission (CSRC) to ensure that only the best-managed firms are allowed to go public. This article finds that in terms of long-term financial performance, state-owned enterprises (SOEs) that are approved for IPO and public listing by CSRC tend to under-perform those privately owned enterprises that are not approved for IPO and public listing by CSRC. Such a finding has some important implications for how China’s domestic stock markets should be regulated.