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2023 | OriginalPaper | Buchkapitel

4. Technology Applications in Private Equity Regulation

verfasst von : Ruihui Xu, Dawei Zhao

Erschienen in: Digital Transformation of Private Equity in China

Verlag: Springer Nature Singapore

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Abstract

China’s PE industry entered the initial development stage in the early 1990s by establishing several investment fund companies.

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Vorheriges Kapitel Private Equity Investment in Fintech

Nächstes Kapitel Technology Applications in Private Equity Compliance Management

It refers to Wuhan Securities Investment Fund, Shenzhen Nanshan Venture Capital and other companies established in 1991.

The China’s fintech regulation framework, just like that the regulation framework of PE, is embedded in the existing financial regulatory framework. The regulators of fintech include the PBC, China Securities Regulatory Commission (CSRC), China Bank Insurance Regulatory Commission (CBIRC, replaced by National Administration of Financial Regulation in May 2023), Financial Stability and Development Committee, National Internet Finance Association (responsible for industry self-regulation) (Xu and Xu 2020).

In China, foreign PE firms entered the market before China’s local PE industry was developed, which led to different laws and regulations faced by foreign and local PE firms. In recent years, China exert great effort to regulate foreign and local firms and level the playing field (Yue and Zhang 2010; Bradford and McKinzie 2020).

It is published on the CSRC website. http://www.csrc.gov.cn/csrc/c101939/c1045353/content.shtml.

The notice and draft are published on the PBC’s website. http://www.pbc.gov.cn/rmyh/105208/4436903/index.html.

Return misreporting of PE and VC fund managers is well documented in literature. With a sample of 997 buyout funds and 1,074 venture funds from Burgiss database, Brown et al. (2019) find that some underperforming managers manipulate reported returns during fundraising, and those managers are less likely to raise a next fund. With data of VC funds headquartered in the U.S. from PitchBook, Smith et al. (2022) find that fund managers can manipulate returns by inflating NAVs and by reporting selectively, and selective reporting by GPs overstates VC fund returns by 4 percentage points.

Financial Services Authority (2006) identified risks posed by the PE market, including excessive leverage, unclear ownership of economic risk, market abuse, conflicts of interest, market access, market opacity, and overall capital market efficiency. To strengthen oversight of PE, the FSA exert efforts in improving its data collection, and enhance regulatory reporting requirements for PE firms to incorporate information on committed capital in addition to the existing requirements.

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Broeders D, Prenio J. Innovative technology in financial supervision (suptech)-the experience of early users. BIS Financial Stability Institute Insights on policy implementation No 9; 2018. https://www.bis.org/fsi/publ/insights9.htm

Brown G, Gredil O, Kaplan SN. Do private equity funds manipulate returns? J Financ Econ. 2019;132:267–97.CrossRef

Brown G, Harris B, Jenkinson T, Kaplan S, Robinson D. Private equity: accomplishments and challenges. J Appl Corp Financ. 2020;32(3):8–20. https://doi.org/10.1111/jacf.12415.CrossRef

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Titel: Technology Applications in Private Equity Regulation
verfasst von: Ruihui Xu
Dawei Zhao
Verlag: Springer Nature Singapore
Buch: Digital Transformation of Private Equity in China
Print ISBN: 978-981-9984-81-7

Electronic ISBN: 978-981-9984-82-4

Copyright-Jahr: 2023
DOI: https://doi.org/10.1007/978-981-99-8482-4_4