Tolls on Entrepreneurs from Capital Market Distortions: Evidence from IPO Locational Choices

Capital controls and other policy distortions in the capital market are costly to entrepreneurs. We propose a structural estimation approach to quantify the effect using IPO locational choices. We estimate the willingness-to-pay to bypass these distortions by the Chinese entrepreneurs with overseas listed firms to be a haircut in firm value by 50-60%. We infer that the welfare for the entrepreneurs could rise by 22% from the relevant capital market reforms.