Refining the Art of Reforming the Corporate Governance of Chinese State-Controlled Listed Companies: Venture Capital and Adaptive Efficiency

The corporate governance of Chinese state-controlled listed companies (SCLCs) has attracted much scholarly attention. Through reviewing the extant literature in this field, it is clear that the overwhelming majority is theoretically underpinned by the lens of agency costs. Another important perspective, adaptive efficiency, has yet to be equally emphasized by scholars. Reflecting on the experience of American venture capital (VC), this article puts forth that the corporate governance of SCLCs has weakened the fundraising ability of Chinese domestic VC. Taking account of the positive link of a vibrant VC sector and the enhancement of adaptive efficiency, an obvious conclusion is that the corporate governance of SCLCs has already jeopardized the adaptive efficiency of the Chinese economy. Further, the normative implication of this finding is that the refined art of reforming the corporate governance of SCLCs ought to combine and harmonize agency costs with adaptive efficiency.     

The dynamic investment and exit decisions of venture capitals

This study develops a continuous time model to examine a complete two-stage decision process for venture capitals (VCs), including investment in the private market at Stage 1 and exit through IPO in the public market at Stage 2. Optimal timings, investment terms, and exit decisions are investigated using the real options game theory under two cases: the same required returns in the public and private markets and a higher required return in the private market than in the public market. Our results indicate that the same required returns in the public and private markets generate an optimal investment decision at Stage 1 without relation to the exit decision in Stage 2. However, when the required return in the private market is higher than that in the public market, the exit decision will influence the investment decision. The size of the initial capital, ownership structure, growth rate and risk of industry, required returns in public and private capital markets, extent of lock-up period price pressure, and transaction costs of financing are important factors influencing the equilibrium results.     

The influence of people on the performance of IPO firms

Until the mid-1990s, the study of initial public offerings (IPOs) fell mainly under the purview of the finance literature. Within the last 10 years, however, management and entrepreneurship scholars have delved more into this subject area, as well. This article summarizes research examining IPO firms that has appeared in management and entrepreneurship journals, highlighting in particular the influence of individuals (namely executives and boards of directors) on IPO firm outcomes.