Proceedings of the 5th Economic & Finance Conference, Miami

BARRIERS OF FDI INFLOW IN VENTURE CAPITAL AND PRIVATE EQUITY IN THE CZECH REPUBLIC

BOŽENA KADEŘÁBKOVÁ, ONDŘEJ PTÁČEK

Abstract:

The barriers that negatively affect the PE and VC investment activity in the Czech Republic include the following aspects. Few sources for funds from traditional fund raisers such as pension funds or insurance companies, which is caused mainly by legislative restrictions. Insufficient project quality causes high proportion of transaction cost to investment amount ratio. Insufficient project quality, lack of projects due to little interest from the potential investee companies caused by imperfect information all mean higher risk for investors causing their risk aversion to concentrate mainly on larger projects. Insufficient fundraising conditions lead also to few opportunities for exits. These are the main reasons of the Czech Republic’s little PE and VC market activity, which is limited to 10-20 investments per year in total.

Keywords: venture capital, asset management, private equity, financial markets, market failure, government failure

DOI: 10.20472/EFC.2016.005.008

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