Venture Capital And IPO Over-Funding:Evidence From China

October 2009, launch of the GEM has attracted a lot of investors in China, it is those investors’ Blindly optimistic behavior that help China’s economic recovery. But this also brought many problems, such as high issue price, high price-earnings ratio and IPO over-funding, which IPO over-funding get more attention. At the same time, previous scholars made much thorough study, which mainly focused on influencing factors of over-funding and how to regulate and use ultra raised money. However, we find that VC play an important role in listed companies’ over-funding. Previous scholars also made much study on exit mechanism of VC, effect of VC on IPO underpricing, companies’ investment and financing behavior etc. However, previous studies rarely paid attention on the connection of VC and IPO over-funding, which makes the previous research has some deficiencies. Therefore, this paper basing on previous studies, analyses the intrinsic relationship between VC and IPO over-funding.In order to reveal the internal mechanism of VC and IPO over-funding, this paper theoretically analyses impact of VC on the corporate governance structure, corporate’ the selection of IPO underwriters, IPO over-funding. Then, we take 2009-2012 GEM listed companies as samples, from the corporate governance structure and underwriters two different aspects, using descriptive statistics and multivariate regression analysis and other methods of empirical analysis. The empirical results show that, VC has a significant impact on companies’ IPO over-funding through the corporate governance structure and underwriters these two different aspects. First, VC reduces managerial shareholding ratio, improves the independence of the Board. The stronger independence of the Board, the higher managerial shareholding ratio, the higher companies’ IPO over-funding ratio will be. Second,VC can affect company’s decision on selection of IPO underwriter.Namely,VC-backed companies are more willing to choose a underwriter with high reputation. And the higher reputation of underwriter, the higher company’s IPO over-funding ratio will be.