IPO over-financing and stock price crash risk: Evidence from China

Xiang Wu, Bing Zhang, Junhui Fu and Yufang Liu

Finance Research Letters, 2022, vol. 47, issue PA

Abstract: This paper investigates the impact of IPO over-financing on stock price crash risk. Using a unique Chinese database, we find a significant positive relationship between IPO over-financing and crash risk. This finding holds after a series of robustness checks including the inclusion of some omitted variables, longer forecasting windows, and other measure of crash risk. Further analyses show that the impact of IPO over-financing on crash risk is more pronounced in low Tobin’s q firms. Moreover, we find that IPO over-financing affects crash risk through over-investment effect.

Keywords: Stock price crash risk; IPO over-financing; Tobin’s q; Over-investment effect (search for similar items in EconPapers)
JEL-codes: G1 G3 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:47:y:2022:i:pa:s1544612321005171

DOI: 10.1016/j.frl.2021.102555

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