Economic Policy Uncertainty and Syndication: Evidence from China’s Venture Capital Market

Abstract

ABSTRACT This study investigates how economic policy uncertainty (EPU) impacts the syndication behaviors of venture capital firms (VCs). Analyzing data from China, we find that EPU boosts the likelihood that VCs take syndicated investments. When facing great EPU, compared with their domestic and private counterparts, foreign and state-backed VCs exhibit a greater propensity for syndication, particularly in collaboration with VCs from distinct capital backgrounds. Further, EPU reduces VCs’ risk-taking tendencies and exacerbates inadequate information exchange in the market, thereby making VCs more inclined to syndicate their investments. Finally, EPU adversely affects VCs’ exit performance, but syndication helps alleviate this impact.