Internal corporate governance and the use of IPO over-financing: Evidence from China

Artikel

In this paper, we describe how Shenzhen A-share listed companies used funds raised in over-financed IPOs during the 2006-2010 period. In exploring the relationship between internal corporate governance and the use of funds raised in over-financed IPOs, we find that the use of such funds to engage in severe over-investment behavior is prevalent among listed companies. Reasonable internal corporate governance mechanisms can effectively alleviate over-investment problems listed companies encounter in using funds raised in over-financed IPOs. However, the same individual serving as both chairman and CEO leads to funds raised in over-financed IPOs being over-invested. Moreover, executives driven by high levels of monetary compensation are more likely to use funds raised in such IPOs to engage in over-investment. We find that improving the balance of power between shareholders will help alleviate the over-investment of excess IPO funds. In addition, the over-investment problem is less severe in state-controlled listed companies than in their non-state-controlled listed counterparts. This study provides policy recommendations for Chinese securities regulators to ensure listed companies use funds raised in over-financed IPOs both rationally and effectively.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Journal: China Journal of Accounting Research ; ISSN: 1755-3091 ; Volume: 5 ; Year: 2012 ; Issue: 3 ; Pages: 231–249- ; Amsterdam: Elsevier

Classification and Topics

• Classification: Management ; General Financial Markets: General (includes Measurement and Data) ; Capital Budgeting; Fixed Investment and Inventory Studies; Capacity ; Corporate Finance and Governance: Government Policy and Regulation
• Subject: Internal corporate governance ; IPO over-financing ; Over-investment ; Non-capital investment

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Xu, Xin ; Xia, Yun
• Event: Veröffentlichung
• (who): Elsevier
• (where): Amsterdam
• (when): 2012

Further information

• DOI: doi:10.1016/j.cjar.2012.08.003
• Handle: http://hdl.handle.net/10419/187575
• Last update: 10.03.2025, 11:43 AM CET