Institutional Determinants of Private Equity Market in Czech Republic

Abstract

A well-functioning private equity and venture capital market is affected by a range of institutional aspects. This study intends to answer the question on what is the current tax and legal environment for private equity and venture capital investments in Czech Republic as previous studies have emphasized that a rather poor scope of resources available. Qualitative data with content analysis proved to be the best way to assess the institutional framework. Data collection methods cover a comparative analysis of scientific literature documents and reports, as well as primary data from interviews with experts in the industry. The results of both secondary and primary data analysis were categorized and serious gaps in the institutional framework were identified and discussed. Our results indicate that the issue of legal and organisational structure suitable for private equity and venture capital funds may be resolved through a national equivalent to a Limited Partnership which has already been adopted into Czech law. However, a tax handicap was identified implying that it is necessary to amend the tax legislation so that the legal regulation extends the tax exemption. Another amendment should then be directed towards eliminating or mitigating the barriers imposed on pension. We believe that our findings provide valuable implications for the government, banks, stock exchanges and venture capital industry while formulating new strategies how to increase the level of investments in this specific environment of Czech Republic.

Why Do Companies Go Public? Evidence from the Prague Stock Exchange

“…Moreover, the current excess of liquidity in the banking sector resulting in accessible and cheap loans and financing provided by foreign parent companies have been discussed. Firm-specific factors represent another category of factors that might motivate a company to go public or deter it from launching public equity markets (Skalická Dušátková, Zinecker, & Meluzín, 2017). The phenomena of information asymmetry, information disclosure, losing control over the company or IPO failure risk have received fairly substantial support in the academic studies (Myers, 1984;Myers & Majluf, 1984;Chemmanur & Fulghiery, 1999;Fontinelle, 2015;Isniawati, Rahmawati, & Gunardi, 2018).…”