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IPO over-funding and cost stickiness

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  • Lu Zhang
  • Jincai Li
  • Huijuan Wang

Abstract

The paper explores the influence of IPO over-funding on the cost stickiness. We first document that the liquidity from IPO over-funding has positive association with the cost stickiness in China which indicates that the liquidity supplement from IPO over-funding increases manager’s empire building incentives and reduces company’s operating efficiency. Besides, we find that this positive association is more significant in companies with weak governance in terms of less power balance, lower debt constraints and less institutional investor’s supervision. It is because company’s governance mechanism plays an important role on the efficiency of IPO proceeds. These conclusions provide enlightenment for the current regulation of listed companies.

Suggested Citation

  • Lu Zhang & Jincai Li & Huijuan Wang, 2021. "IPO over-funding and cost stickiness," Asia-Pacific Journal of Accounting & Economics, Taylor & Francis Journals, vol. 28(4), pages 411-426, July.
    • Handle: RePEc:taf:raaexx:v:28:y:2021:i:4:p:411-426
    DOI: 10.1080/16081625.2019.1601024
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    Cited by:

    1. Sun, Yu & Gong, Hui, 2023. "Firm financialization and cost stickness behavior," Finance Research Letters, Elsevier, vol. 57(C).
    2. Adam Krzymowski, 2022. "Role and Significance of the United Arab Emirates Foreign Aid for Its Soft Power Strategy and Sustainable Development Goals," Social Sciences, MDPI, vol. 11(2), pages 1-18, January.
    3. Chen, Shirley (Shuo) & Meng, Chong, 2024. "Conscientiousness and IPO first-day underpricing," Finance Research Letters, Elsevier, vol. 65(C).

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