Abstract
We examine whether political ties (PTs) benefit VCs in China and find a positive relationship between PTs and successful VC exits. Our findings indicate that PTs are crucial for VCs to exit via Chinese mainland stock markets and M&As. The impact of PTs depends on the nature and compositions of PTs. We document that VCs with management-level PTs enjoy greater success than those with ownership-level PTs, whereas no significant difference between central and local government PTs on VC exits. Our results remain stable after controlling for selection bias, alternative measures for VC exits, and legal and institutional differences across regions.
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