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

• 作者: Xin Xu Yun Xia
• 来源期刊: 中国会计学刊：英文版
• 学科: 经济
• 关键词: INTERNAL CORPORATE GOVERNANCE IPO over-financing O
• 年，卷（期）: 2012,（3）
• 页码范围: 231-249
• 页数: 19页
• 分类号: F832.51

摘要

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 overfinanced 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 nonstate-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.