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

被引:8
作者
Xu, Xin [1 ]
Xia, Yun [2 ]
机构
[1] Zhongnan Univ Econ & Law, Sch Accounting, Wuhan, Hubei, Peoples R China
[2] Jinan Univ, Sch Int Business, Jinan, Peoples R China
关键词
Internal corporate governance; IPO over-financing; Over-investment; Non-capital investment;
D O I
10.1016/j.cjar.2012.08.003
中图分类号
F8 [财政、金融];
学科分类号
0202 ;
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 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 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. (C) 2012 China Journal of Accounting Research. Founded by Sun Yat-sen University and City University of Hong Kong. Production and hosting by Elsevier B.V. All rights reserved.
引用
收藏
页码:231 / 249
页数:19
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