Study Of The Reasons And Economic Consequences Of Participation In Venture Capital

Since the Shenzhen Stock Exchange opened the GEM(Growth Enterprise Market) at October 30, 2009, many listed companies have had a mass favor to hold shares of companies listed on GEM. These motives of listed companies and the economic consequences are the main objects to study in this article. And the results will provide a theoretical and case reference for listed companies.Firstly, the characteristics of companies listed on GEM were studied and four characteristics of companies listed on GEM can be drawn:(1)distinctive structure;(2)high growth;(3)innovation ability;(4)high-tech. In order to illustrate the motives of listed companies and the economic consequences, two cases were selected to discuss: China Bao'an holding Dinglong shares, Dy Matic holding Oxiranchem shares,and Konka holding Refond. China Bao'an value creation and cash were analyzed using financial strategy matrix. China Bao'an was in the second quadrant of the financial strategy matrix, having a surplus of funds. Comparing profitability indicators and capacity development indicators between China Bao'an and Dinglong, the indicators of Dinglong were better than China Bao'an. China Bao'an can get substantial financial benefits from investing Dinglong. The SWOT method was used to analyze internal and external environment Dy Matic and Nonka facing. The results showed that Dy Matic can get the strategy benefits from holding Oxiranchem shares. For example, supply of raw materials, R & D capabilities improvement, and competitiveness. Namely Dy Matic holding Oxiranchem was motivated by strategic objectives.In order to study the economic consequences, two cases were selected to discuss: China Bao'an holding Dinglong shares, Dy Matic holding Oxiranchem shares. And the results explained the equity investment on GEM have some positive impacts on the development of listed company's share price and the target company. Listed companies can bring investment income through selling shares of companies listed on GEM or cash dividend. And through holding stocks of companies listed on GEM, listed companies can improve profitability and research and development capabilities.