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Venture Capital Exits and the Structure of Stock Markets in China

  • Lin LIN (a1)
Abstract
Abstract

Existing literature suggests a strong relationship between a vibrant venture capital market and an active stock market: venture capital flourishes when venture capitalists can readily exit from successful portfolio companies through IPOs, and IPOs are in turn facilitated by active and efficient stock markets. This article uses China as a case study to explore the connection between the stock market and venture capital market. Through empirical studies, this article confirms the existing literature by demonstrating a close connection between the stock market and venture capital market in China. It also refines the existing literature by finding that, for venture capital availability, laws and policies also matter in China. Strong and sustained law reforms and government policies aimed at improving the institutional structure and regulatory environment of the stock market can facilitate venture capital-backed exits, which in turn lead to an increase in new venture capital availability in China. Nonetheless, numerous IPO closures have led to freeze-ups in China’s venture capital market. Also, there remain a multiplicity of institutional impediments to the efficient operation of the stock market and the effective implementation of IPO reforms in China. These may in turn hinder the development of the Chinese venture capital industry.

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Assistant Professor, Faculty of Law, National University of Singapore (NUS). Helpful comments on earlier drafts of this article were received from Prof. Kon Sik Kim, Prof. Hans Tjio, Prof. Lan Luh Luh, Mr. Florian Gamper and Mr. Jerrold Soh. I also thank the participants in the 25th Australia Annual Corporate Law Teachers Association Conference and the 12th Asian Law and Economics Association (AsLEA) Annual Conference and the 15th Tsinghua 21st Century Commercial Law Forum. I am grateful to the interviewees from China, who generously shared their knowledge and insights with me. Interviews were conducted on an anonymous, background basis.

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This list contains references from the content that can be linked to their source. For a full set of references and notes please see the PDF or HTML where available.

Brigette Haar , ‘Articles/Impressions of the First RICAFE Conference: Risk Capital and the Financing of European Innovative Firms’ (2004) 5(1) European Business Organization Law Review 201

Bernard S Black and Ronald J Gilson , ‘Does Venture Capital Require an Active Stock Market?’ (1999) 11 Journal of Applied Corporate Finance 36

Edward B Rock , ‘Greenhorns, Yankees, and Cosmopolitans: Venture Capital, IPOs, Foreign Firms, and U.S. Markets’ (2001) 2 Theoretical Inquiries in Law 711

Colin Mayer , Koen Schoors , and Yishay Yafeh , ‘Sources of funds and investment activities of venture capital funds: evidence from Germany, Israel, Japan and the United Kingdom’ (2005) 11 Journal of Corporate Finance 586

Leslie A Jeng and Philippe C Wells , ‘The determinants of venture capital funding: evidence across countries’ (2000) 6 Journal of Corporate Finance 241

Bernard S Black and Ronald J Gilson , ‘Venture capital and the structure of capital markets: banks versus stock markets’ (1998) 47 Journal of Financial Economics 243

Douglas J Cumming and Jeffrey G MacIntosh , ‘Venture-Capital Exits in Canada and the United States’ (2003) 53 University of Toronto Law Journal 101

Douglas J Cumming and Jeffrey G MacIntosh , ‘A Cross-Country Comparison of Full and Partial Venture Capital Exits’ (2003) 27(3) Journal of Banking and Finance 511

Marco Da Rin , Giovanna Nicodano , and Alessandro Sembenelli , ‘Public policy and the creation of active venture capital markets’ (2006) 90 Journal of Public Economics 1699

Stefano Bonini and Senem Alkan , ‘The political and legal determinants of venture capital investments around the world’ (2012) 39 Small Business Economics 997

Michael A Goldstein and Edward F Nelling , ‘Market Making and Trading in Nasdaq Stocks’ (1999) 34(1) The Financial Review 27

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Asian Journal of Comparative Law
  • ISSN: 2194-6078
  • EISSN: 1932-0205
  • URL: /core/journals/asian-journal-of-comparative-law
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