Empirical Research On The Impact Of Gem Listed Companies’ Over-financing On Investment Efficiency

In 2009, the GEM which is known as China’s NASDAQ was officially launched in Shenzhen Stock Exchange. The high earnings multiples, high issue price, high Over-funding phenomenon is particularly prominent, which causes a lot of hot topics. This article takes a research on the economic consequences of the GEM listed companies’ over-financing phenomenon mainly from the perspective of investment behavior and investment efficiency. Theoretically, by the restrictions of companies’ development scale, management and capital operation ability, when the actual amount of funds raised through the IPO far exceeds the required amount of financing plan, the listed companies are difficult to find out suitable investment projects for the huge super-raised funds in a short time. In addition, with the asymmetric information, principal-agent conflict and investment- free cash flow sensitivity, the opportunistic motives of governance layer, management layer and major shareholders can easily lead to the raised funds being abused, misappropriated or long time idle. As mentioned, the over-financing would reduce the companies’ investment efficiency particularly in the GEM market.In order to test the impact of GEM listed companies’ IPO over-financing on investment efficiency, this paper firstly summarizes the existing theory and domestic and foreign literature, and then analyzes the GEM listed companies’ over-financing phenomenon and the use of raised funds, which combines the qualitative and quantitative analysis. After that, based on asymmetric information theory, principal-agent theory and free cash flow hypothesis, this paper analyzes the relationship between over-financing phenomenon and investment efficiency. This article selects a total of 825 samples’ financial data from 355 IPO listed companies on GEM from 2010 to 2013 to make empirical research. Firstly, on the basis of using Richardson’s investment expectation model to measure the non-efficiency investment level of enterprises, this study builds the relationship model. And then, this paper empirically analyses the influence of the GEM listed companies’ over-financing on the overall non-efficiency investment level, over-investment and under-investment. At last, this paper put forward a series of recommendations according the empirical results.The results show that, firstly, the over-investment and under-investment are two common inefficient behaviors in the GEM listed companies, and the data indicates more companies having under-investment. Secondly, significant positive correlation exists between over-raised ratio and non-efficiency investment, the level of over-financing is higher, the non-efficiency investment is more serious. Thirdly, the over-raised ratio has positive correlation with over-investment, which is not significant, but is significantly positively related to under-investment. It indicates that the impact of over-financing on the investment efficiency is more attributed to under-investment. In the end, according to the results of theoretical and empirical analysis, this paper provides reasonable policy recommendations on the IPO over-financing amelioration and the investment efficiency promotion.