The Cost of Capital Market Distortions: Evidence from IPO Locational Choices

Abstract

Capital market distortions can be costly to entrepreneurs who are drivers for job creation and economic growth. From IPO locational choices, we estimate that the willingness-to-pay by the entrepreneurs of overseas listed Chinese. Firms to be equivalent to a haircut in .rm value by 50-60% in order to bypass these distortions. Additional independent data con.rm the plausibility of this estimate. With a structurally estimated model, we infer that the welfare gains for the entrepreneurs from the relevant capital market reforms to be 18%.

Presented by Shang-Jin Wei