Economics Homework Help

Can Governments Foster the Development of Venture Capital?

-Yue Fei-

Toulouse School of Economics

Article: https://www.tse-fr.eu/sites/default/files/TSE/docu…

Key Points in the Article:

Exploring a novel dataset and a unique policy experiment, this paper examines the role of government intervention in the emergence of venture capital (VC) in China during 1999-2013. Using difference-in-difference methodology, I find that the central government program leads to increased local investment from both government and private VCs, doubling the number of successful companies. I present two micro-level transmission channels of the crowding-in effects: through networks formed by previous investments and

co-ownership in VC affiliates. The positive impact is most pronounced in relatively less developed regions during the early development of the VC sector. Evidence suggests a possible downside of government intervention: government VCs underperform private VCs in terms of exits through initial public offerings (IPOs) and mergers and acquisitions, potentially due to agency conflicts.

Question:

– Discuss the government’s impact on venture capital.about

5-6 lines

Q2: An investor owns a bond selling for $3,000. This bond can be converted into 90 shares of stock that are currently selling for $40 per share. Should the investor convert his bond into shares?

Q2: Al Olaa Company owns 100 million shares and is currently trading at SAR 40 per share. To provide financing for expansion, Al Olaa decided to give investors exercises right to buy one additional share for every 5 shares owned in a 1:5. How much should each share be worth after the rights issue if they previously sold for SAR 35 each?

Q3: Explain the concept of Financial Distress and Financial Slack.

Textbook

• Brealey, R., Myers, S., and Marcus, A. (2012). Fundamentals of Corporate Finance. (7th). New York, NY: McGraw-Hill/Irwin. ISBN: 9780078034640 (hard copy); ISBN: 9780077410711 (e-copy).