Abstract
With the mirror of the practice of American VCs, this book has demonstrated that the corporate governance of Chinese state-controlled listed companies has badly hampered the healthy development of Chinese domestic VCs. Overall speaking, under the negative effects of the control-based model, the majority of Chinese domestic VCs are GVCs and private domestic VCs only represent the minority. As for GVCs, because of the lack of the involvement of institutional investors, the amounts of their funds are much smaller than those of their American competitors. Meanwhile, confronted with the intervention of governments, venture capitalists in GVCs feature a lower risk tolerance level and the deprivation of independence. In addition, various incentive mechanisms are also not able to function well in the investment of GVCs. Finally, even if their invested projects are successful, GVCs cannot smoothly and efficiently achieve exits through IPOs. As a result, the array of defects of GVCs which is largely linked to the control-based model determines that their investment is generally associated with small scales and low success and return rates. With regard to private domestic VCs, the shortage of their fund sources is more severe than GVCs, which has substantially weakened the risk tolerance level of venture capitalists working for them. Moreover, VC investors of private domestic VCs are usually not able to remain passive. Consequently, the intervention of VC investors has replaced the autonomy of private domestic VCs in the process of selecting projects. In the aspect of exits, similar to GVCs, the IPO road of private domestic VCs is still uneven. Therefore, the combination of the above disadvantages of private domestic VCs which are closely ascribed to the control-based model has led to the fact that their investment scale is small and their return rate is low. Even though empirical evidence to analyze the influence of the control-based model on the application of incentive mechanisms in the investment of private domestic VCs could not be collected, this limitation just reflects the basic fact of academic research but does not substantively affect the verification of the hypothesis of this book because private domestic VCs only belong to the minority of the aggregation of Chinese domestic VCs.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
Notes
- 1.
From the viewpoint of transaction cost economics, the success of the American VC template lies in the fact that it significantly reduces the transaction costs among the related parties in the whole cycle of VC so as to reinforce innovation and the adaptive efficiency of America. In contrast, due to the barriers imposed by the control-based model, Chinese domestic VCs feature high transaction costs in each section of its cycle, which ultimately undermines the cultivation of innovation and the increase of adaptive efficiency of Chinese society.
- 2.
Roe MJ (2003) Political determinants of corporate governance: political context, corporate impact. Oxford University Press, Oxford.
- 3.
Bao X (2009) China’s political reform: historical experiences and current choices. Shandong Soc Sci 161:19–20.
- 4.
Ibid.
- 5.
See Sect. 2.2.2.
- 6.
See footnote 46, Chapter 2.
- 7.
See footnote 47, Chapter 2.
- 8.
Chang X (2010) How do we establish a public servant government. http://theory.people.com.cn/GB/49150/49152/9369415.html. Accessed 2 Feb 2010.
- 9.
Hu J (2010) Report to the seventeenth CPC national delegates’ conference. http://news.xinhuanet.com/newscenter/2007-10/24/content_6938568_5.htm. Accessed 2 Feb 2010.
- 10.
See footnote 8 above.
- 11.
Ibid.
- 12.
Ibid.
- 13.
Ibid.
- 14.
Ibid.
- 15.
Ibid.
- 16.
See Chapters 2 and 6.
- 17.
Available at http://www.ssf.gov.cn/xxgk/flfg/200904/t20090427_910.html. Accessed 2 Feb 2010.
- 18.
Ibid.
- 19.
See footnote 20, p 88, Chapter 1.
- 20.
Ibid.
- 21.
Ibid.
- 22.
Ibid.
- 23.
Available at http://www.ssf.gov.cn/zjcj/gzdt/200906/t20090625_2277.html. Accessed 2 Feb 2010.
- 24.
Ibid.
- 25.
As analyzed in Chapter 2, the corporate governance framework of Chinese state-controlled listed companies is called the control-based model, which means the state commonly holds the controlling blocks of those giant enterprises. The concentrated ownership of the state has led to severe agency problems in Chinese state-controlled listed companies. Thus, the divestiture of state-owned shares is the fundamental approach to substantially reduce their high agency costs.
- 26.
See Article 15 of the Constitution of the PRC and the General Provisions of the Charter of CPC.
Author information
Authors and Affiliations
Corresponding author
Rights and permissions
Copyright information
© 2012 Springer Science+Business Media, LLC
About this chapter
Cite this chapter
Zhang, L. (2012). Conclusion. In: Venture Capital and the Corporate Governance of Chinese Listed Companies. Springer, New York, NY. https://doi.org/10.1007/978-1-4614-1281-6_7
Download citation
DOI: https://doi.org/10.1007/978-1-4614-1281-6_7
Published:
Publisher Name: Springer, New York, NY
Print ISBN: 978-1-4614-1280-9
Online ISBN: 978-1-4614-1281-6
eBook Packages: Business and EconomicsEconomics and Finance (R0)