Influence of internal corporate governance mechanisms on use of IPO proceeds by Indian firms
Description
The utilization of IPO proceeds represents a formal commitment to shareholders, beginning at the time of the public offering and continuing until the funds are fully deployed. How firms honor this commitment—both in letter and spirit of applicable laws and regulations—can signal their efficiency and credibility to existing and prospective investors. In this paper, we examine the role of internal corporate governance mechanisms in influencing the utilization of IPO proceeds by Indian firms. Our study analyzes 218 IPOs issued between 2007 and 2010, drawing on annual reports and corporate disclosures to track the deployment of proceeds over the period 2007–2013. We specifically investigate deviations in the use of IPO funds, firms’ responses to such deviations, and the broader implications for corporate governance. Our findings indicate that institutional investors play a monitoring role that helps reduce deviations in the utilization of IPO proceeds. In contrast, family management is associated with a higher extent of deviation from stated purposes. These results highlight the importance of governance structures in ensuring the effective and transparent use of public capital.
Copyright Date
January 2018
Publication Date
1-1-2018
Publisher
Academy of Management
Keywords
Corporate governance, Initial public offering, IPO
Conference
Academy of management conference: August, 2018, Chicago, USA
