How the capital market laws affect the development of venture capital industry
| Published date | 01 December 2005 |
| Date | 01 December 2005 |
| Pages | 301-312 |
| DOI | https://doi.org/10.1108/13581980510635537 |
| Author | Jarunee Wonglimpiyarat |
| Subject Matter | Accounting & finance |
How the capital market laws affect
the development of venture capital
industry
Jarunee Wonglimpiyarat
Science Policy Researcher and Certified Public Accountant (CPA) at the Ministry of Science and
Technology, Thailand
Jarunee Wonglimpiyarat is a Science
Policy Researcher at the Ministry of
Science and Technology and works in the
Advisory Group to Deputy Prime Minister
Phinij Jarusombat of Thailand. She is cur-
rently a Post-Doctoral Research Fellow at
Boston University and Harvard University,
USA.
ABSTRACT
KEYWORDS: Securities markets, capital
ventures, regulation
Given that the stock market is essential for the
venture capitalists to exit through an initial
public offering (IPO), this study explores how
the laws and regulations governing the capital
markets affect the venture capital industry. The
paper discusses the impact of US federal state
laws and Securities and Exchange Commission
(SEC) regulations to the venture capital mar-
kets, arguing if the rules and regulatories are
burdensome to entrepreneurs and new-growth
businesses. The impact of Sarbanes-Oxley Act
and the future Investment Act on venture capi-
tal funds and entrepreneurial companies going
public are also discussed. The paper proposes
the model of venture capital financing describing
the process from fund raising to investment
exits, the linkages of the venture capital market
to the financial/capital markets and the related
capital market laws. The policy implications on
SEC regulations essential to the development of
venture capital industry are suggested.
INTRODUCTION
Given that the capital market is essential
for the venture capitalists to exit through
an initial public offering (IPO) within the
venture capital (VC) industry, this paper
explores how the laws and regulations gov-
erning the capital markets affect the ven-
ture capital industry. Section 2 reviews the
theoretical framework on the relation of
venture capital funding and the capital
market, legal structures and regulatories
concerning the venture capital fund. Sec-
tion 3 explores how the push for regula-
tory compliance (the capital market laws)
can be burdensome for venture capital
funds. It aims to understand how the fed-
eral state laws and Securities and Exchange
Commission (SEC) legislative initiatives
and regulations affect the venture capital
markets. Section 4 offers a model of ven-
ture capital financing from fund raising to
management of investment exits. The
model illustrates the linkages between the
venture capital market and the financial/
capital markets and the related capital
market laws. Policy implications with
regard to the development of venture capi-
tal industry as well as conclusions are
drawn in Section 5.
Page 301
Journal of Financial Regulation and Compliance Volume 13 Number 4
Journal of Financial Regulation
and Compliance, Vol. 13, No. 4,
2005, pp. 301–312
#Emerald Group Publishing
Limited, 1358–1988
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