The pre-IPO dividend and the cost of equity capital: Evidence from China

We examine how pre-IPO dividend payments affect the cost of equity capital using data from China's A-share market (2010–2022). Firms distributing large pre-IPO dividends face higher post-listing equity costs due to investor concerns over agency risks and cash flow constraints. This effect is stronger for non-SOEs, growth-stage firms, and technology-intensive enterprises. Institutional factors, such as regional market development and economic policy uncertainty, further condition this relationship. Our findings, robust to alternative measures and endogeneity checks, highlight the long-term impact of pre-IPO financial decisions and underscore the role of regulatory oversight in shaping investor expectations.