Abstract
This paper examines how venture capital (VC) investment and institutional factors affect the performance of VC-backed companies in China. We conduct empirical analysis using a sample of companies listed on China’s Growth Enterprise Market (GEM) from 2009 to 2015. Our results show that, compared to non-VC-backed companies, VC-backed companies have higher market value but underperform in terms of profitability. We also document evidence that while VC investment does not help companies mitigate the negative impact of institutional factors on profitability, it does convey beneficial effects that help companies moderate the negative impact of institutional factors on market value.
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