Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/187575 
Authors: 
Year of Publication: 
2012
Citation: 
[Journal:] China Journal of Accounting Research [ISSN:] 1755-3091 [Volume:] 5 [Issue:] 3 [Publisher:] Elsevier [Place:] Amsterdam [Year:] 2012 [Pages:] 231–249-
Publisher: 
Elsevier, Amsterdam
Abstract: 
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.
Subjects: 
Internal corporate governance
IPO over-financing
Over-investment
Non-capital investment
JEL: 
G10
G31
G38
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by-nc-nd Logo
Document Type: 
Article

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