Venture Capital Finance in China

The globalization of capital flow has resulted in an increasing number of firms choosing to cross-list their stocks in foreign stock exchanges to raise public equity capital abroad, and more recently, the booming of venture capital (VC) inflow to developing nations to finance the start-ups and growth companies in those emerging economies. The dramatic rise in venture-funded activity in developing nations has been largely fueled by institutional investors in the United States and other developed nations. Among the developing nations, China, in the transition from a central planning regulated economy to a free market economy, has progressed quickly in grasping these unique funding opportunities to encourage the emergence of innovative enterprises and ensure its relevance in the global economy

Venture-backed IPOs and the Exiting of Venture Capital in China

This paper documents the dramatic improvement in institutional, legal and regulatory environment for the exiting of foreign venture capital in China. It also discusses the recent developments, advantages and disadvantages of various China venture-backed IPO listing channels, including overseas listing through the main board and high-tech trading board in the United States (via New York Stock Exchange and NASDAQ), Hong Kong (via Hong Kong Stock Exchange and Hong Kong Growth Enterprise Market) and Singapore (via Singapore Exchange and SESDAQ), and domestic listing (via Shenzhen Small and Medium Enterprise Board). Finally, this paper examines the venture capital funding and IPO offering details, and the short-run and long-run performance of the U.S.-listed China Venture-backed IPOs between 2000 and 2005

A Comparative Study of Venture Capital Performance in the US and Europe

For the past fifty years in the United States, venture capital (VC) has provided initial funding to innovative entrepreneurial enterprises, while the European venture capital industry has only really emerged over the past decade. Using quarterly data from 1993 to 2003, this paper examines and compares the return and risk performance of venture capital funds in US and Europe. Several results are noteworthy. First, pooled venture capital returns in US and Europe are 3.273% and 0.765% (on a quarterly basis) above the CAPM market risk-adjusted returns, respectively. Second, US venture capital fund performance dominates that of Europe in all measures: mean return, total-risk adjusted return, and market-risk adjusted return. Third, the linkage between US VC fund performance and the US stock market is much stronger than the co-movement between the European VC and European stock market. Finally, the introduction of Euro.NM in 1997 has substantially enhanced the relationship between the venture capital and stock market performance in Europe

Volatility, spread revision, volume, and the nature of information

The main objective of this study is to investigate the intraday relations among stock volatility, spread revision, trading volume and the nature of information, and to examine the sources of intraday price volatility. In the first part of this study, I analyze the NYSE market maker\u27s midquote volatility and bid-ask spread revision joint behavior, and its relations with the information content of trades during intraday 30-minute intervals. Empirical results show that the probability for the market maker to revise the bid-ask spread while maintaining the midquote is almost zero, and that the market maker tends to revise the midquote much more often than the bid-ask spread. Estimates from the bivariate ordered probit model show that the midquote volatility is strongly related to the net trading volume and signed trading imbalance; the bid-ask spread revision is strongly related to the absolute trading imbalance and percentage of NYSE volume. Both price volatility and bid-ask spread are significantly higher during the opening 30 minutes. The correlation of the midquote change and spread revision directions is significantly positive, and this correlation is higher for the infrequently traded stocks. The empirical results are consistent with predictions from both the inventory and information based models. In the second part of this study, I examine the contributions of public information shocks, noisy private information, and liquidity effects to the intraday price volatility using a structural model developed by Madhavan, Richardson, and Roomans (1997). The public information component is not significantly different from zero for most stocks, partly because the model is only able to estimate the net effect of all the public shocks during the sample period. Empirical results show a steady decrease in degree of asymmetric information and a monotonic increase in transactional cost component for all sample groups throughout the course of a trading day. On the other hand, the information asymmetry level is higher while the transaction cost component is lower for less frequently traded stocks at the transactional level. Finally, the asymmetric information and transaction cost components exhibit significant intraday variations and these variations are stronger for more frequently traded stocks

Performance of Securities Investment Funds in China

Using daily data from May 2000 to January 2004, this study examines the risk, return, securities selection, and market timing performance of China's securities investment funds (SIFs), in comparison with the performance of the SIFs in the United States. Our results indicate that China investment funds show superior market timing performance, while U.S. fund managers display stronger securities selection ability. These results imply that the potential synergy for Sino-U.S. joint venture investment funds could be tremendous. Additional analysis of the trading volume of closed-end funds in China illustrates that investors' interests in SIFs are strongly and positively related to fund performance. Results also indicate that Chinese investors favor professionally managed funds more than direct investment in stocks during negative market conditions.China, market timing, securities investment funds, security selection,