We investigate the stock price reactions of industry competitors to IPOs in China. Contrary to findings in the U.S., we document a positive valuation effect of Chinese IPOs from 2002 to 2013. This finding is robust to alternative rival definitions, investor reaction measurement, and sample selection criteria. Based on the existing theories and institutional setup of the Chinese stock market, we propose three non-competing hypotheses: the signaling hypothesis (i.e., IPOs could convey positive industry-related information), the collusion hypothesis (i.e., rival firms can benefit from the increasing likelihood of collusion), and the substitution hypothesis (i.e., rival stocks can substitute for IPO stocks as an appealing investment). With a series of tests, we demonstrate that the substitution hypothesis can explain this phenomenon. Furthermore, we find that the spillover effects of IPOs decline with the increase in investment choices after 2014.

This paper provides new evidence on the roles and strategies adopted by different types of debtor-in-possession (DIP) lenders: “loan-to-loan” (LTL) lenders—prepetition secured bank lenders providing DIP financing, and “loan-to-own” (LTO) lenders—activist investors (i.e., hedge funds or private equity funds) providing DIP financing. We find that LTL is more likely in Chapter 11 firms with better operating performance, when prepetition bank lenders' stakes are at risk, or when they have prior lending relationships with the distressed borrower. In contrast, LTO is more likely in small firms or when prepetition bank lenders' loans are over-collateralized. Finally, we show that much of the governance improvement at the emergence is attributed to LTO lenders. We conclude that creditors of different institutional types adopt distinct strategies to enforce their control rights under Chapter 11 reorganization and to have contrasting effects on the governance outcomes of emerged firms.