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 ...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.展开更多
基金the Fundamental Research Fund for the Central Universities of the Chinese Ministry of Education(Grant Nos.2012074 and 11JYB2014)the Talent Introduction Project of Zhongnan University of Economics and Law(Grant No.31541111113)+1 种基金supported by the Social Science Youth Fund of the Chinese Ministry of Education(Grant No. 12YJC630241)the Discipline Construction Special Fund of the Education Department of Guangdong Province(Grant No.WYM11028)
文摘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.
