Use Of IPO Proceeds Does Adhere To The IPO Prospectus?

In recent years, many listed companies in China do not invest IPO proceeds according to IPO prospectus. This may be because these companies just want misappropriating from stock market. The projects stated in IPO prospectus are just fabricated to achieve this purpose.This paper uses 374 companies which conduct IPO in Chinese A-share market from 2004 to 2008 as sample to research changing behaviour. Among these 374 companies,130 companies have ever changed use of proceeds. The average change ratio is as high as 34.76%.158 billion RMB of proceeds had been altered outflow of investment, which accounts 22.8% of total net capital raised by these 130 companies. But when we do some in-depth calculation, we discover the change ratio dramatically dropped after 2005, and continued declining year by year. Overall, the change extent also followed a downward trend.We use Logit and OLS multivariable regression models to research factors that may affect companies’changing behaviour. We find both the degree of IPO underpricing and IPO cost have significantly negative correlations with change ratio and extent, while the number of promised project is significantly positive to change ratio and extent. But the degree of industry competition does not have significant impact on changing behaviour.When check changing behaviour impact on firms’performance, we find although it does not have significant impact on companies’ short-term profitability, it does affect firms’long-term performance. Companies that do not adhere to IPO prospectus have a lower average ROA and ROE in long term than firms do.