Shenzhen Growth Enterprise Market (gem) Run System Research

The Growth Enterprise Market (GEM) is an important part of capital market. One of the main functions of the GEM is financing for the small and medium-sized enterprises, which are innovative and develop rapidly. The other main function of the GEM is to provide a channel of exit for venture capital. The establishment and development of the GEM has the extremely vital significance in economic and financial field. China's GEM will bring new opportunities and challenges in perfecting China's capital market, changing the style of economic growth, fostering new and strategic industry.After nearly 10 years of brewing, in October 2009, China formally began to run the GEM. Compared with foreign GEM, China's GEM have made great achievements in the outspread speed of listed company quantity and total market capitalization, the amount of raising money, the liquidity, the volatility of the index, etc. more than one year. However, China's GEM have also show a lot of problems. Such as, rent seekers become the shareholders nearly before Initial Public Offerings (IPO), the price earning ratio (PE ratio) and the price of IPO is very high, the amount of raising money is more than company's needs, a lot of executives of the listed company have quit for selling stock, some of listed companies of the GEM have no high technology content, the delisting mechanism can't launch, etc.This paper tries to explore the problems that exist in China's GEM and find the solution from the operation system of China's GEM. At first, this paper introduces the origin and development of the foreign GEM. Secondly, this paper summarizes the experiences and lessons of the several typical foreign GEM. Thirdly, this paper introduces the development and present situation of China's GEM. Fourthly, this paper analyzes the current situation and existing problems of some key operation systems in China's GEM, including listed system, trading system, guarantor system, the system of independent directors, information disclosure system, delisted system, on the basis of compare with foreign GEM and China's motherboard market. Then, this paper put up some more specific Suggestions about improving the operation system of China's GEM, At last, the full text were summarized in this paper.In view of the problems in the listed system, this paper suggests that it is necessary to reduce the standards of total equity, net profit, and operation time. So. a large number of potential and innovative enterprises can list.In view of the problems in the trade system, this paper suggests that when the time is good, it is necessary to gradually construct the mixed trading system in a certain range. So, the liquidity and stability of China's GEM are enough. Bidding transaction system and market maker trading system constitutes the mixed trading system. But, the bidding transaction system is prior to market maker trading system. It is also necessary to perfect the agreement trading system and the block trading system, because they are the beneficial supplement of the mixed trading system.In view of the problems in the sponsor system, this paper suggests that it is necessary to detailedly lay down the qualifications of the sponsor and the sponsor representative. It is also necessary to reasonably punish the illegal behavior of the sponsor and the sponsor representative. The supervision period of sponsor must be extended to five years even to lifetime of listed companies.In view of the problems in the independent director system, this paper suggests that it is necessary to set up independent directors association. So, independent directors can be appointed and assessed by the independent directors association. In order to make independent directors to work harder, it is necessary to encourage them by honor, wealth and insurance.In view of the problems in the information disclosure system, this paper suggests that the responsibilities of independent directors to the information disclosure must be strengthened. The illegal information disclosure must be penalized with a heavy hand. Civil litigation and compensation system must be perfected.In view of the problems in the delisting system, this paper suggests that the delisting system must be made more operationally. The standards of delisting must include the index about the ability of growth and sustainable development of listed companies. This is in line with the characteristics of GEM. In view of the problems in the supervisory system, this paper suggests that the responsibilities of supervision must be assigned reasonably among China Securities Regulatory Commission (CSRC), Shenzhen Stock Exchange (SZSE), and China Securities Industry Association. In order to improve the efficiency of supervision and lower the cost of supervision, the regulatory body should strengthen the education that aim at investors.