Missing the Boat: Lengthy Regulatory Approval Diminishes Investment Opportunities at the Project Level

By using unique hand-collected project-level investment data, we show that lengthy equity issuance regulation is positively related to the probability of subsequent project changes and a deterioration in project returns. The effects are more pronounced for firms in a highly competitive industry and with a comparative disadvantage. We further establish that this relationship is causal by exploiting the exogenous shock to approval delay caused by changes in the China Securities Regulation Commission chairman. In response, equity issuers mitigate the delay impact by temporarily increasing short-term debt. Finally, we show that the traditional firm-level investment data fail to detect such effects.