Study On The IPO Capital Cost Effect Of High-tech Enterprises

The high-tech enterprises’characteristics, such as owning few fixed assets, technology intensive, high input and high risk, make them difficult to obtain sufficient funds that can meet capital need for survival and development, no matter relying on internal accumulation or loans from external banks. As a result, it is inevitable for high-tech enterprises to face financing difficulty. The Shenzhen Small and Medium-size Enterprises(SMEs) stock market, which is launched in June 2004, brings a great development opportunity for high-tech SMEs. After that, most of the first 28 enterprises listed in Shenzhen Growth Enterprises(GMs) stock market in October 2009 are high-tech enterprises. So we can say the GMs stock market is just launched for high-tech enterprises. The high-tech enterprises, which are listed in SMEs and GMs board, can not only get enough funds from external but also optimize the management structure.The study of IPO’s influence on the capital cost of equity is a new perspective on IPO effects and capital cost. It has been confirmed in traditional industries that IPO corporations’ capital cost effect generally exits. However, there have been few studies about how IPO can influence the capital cost of emerging high-tech enterprises.Firstly, In order to further dissect internal mechanism about how IPO decreases capital cost, this paper compares the difference of corporation government before and after IPO, and then discusses how IPO influences capital cost through adjusting the level of corporation government. Secondly, this paper selects 17 high-tech corporations listed in SMEs and 41 high-tech corporations listed in GMs from Dec 31,2011 to Dec 31,2012 as samples. Then we use capital asset pricing model(CAPM) to estimate these corporations’capital cost and compare the cost before and after IPO, in order to analyze whether IPO corporations’capital cost effect is existence in high-tech corporations. The study results show that the capital cost of high-tech corporations after IPO decreases significantly than that before IPO. Finally, considering Chinese present development status of capital market and high-tech enterprises’own characteristics, we give some effective advices for high-tech enterprises on how to overcome financing difficulty, satisfying funds need through IPO, reduce capital cost and increase enterprises’value.