Abstract
We examine the effects of venture capital (VC) investment on the performance (measured by return on assets, return on equity, and Tobin's Q) and growth (measured by growth of total sales and total number of employees) of entrepreneurial firms in the People's Republic of China (PRC) after an initial public offering (IPO). Firm-level panel data analysis shows that VC investment contributes to the long-term performance and growth of entrepreneurial firms after an IPO. Meanwhile, we observe a significant and positive relationship between corporate governance of firms and VC investment. However, we do not find that experience or specialization of VC firms influences the effects of venture investment on post-IPO performance or growth of entrepreneurial firms in the PRC.
Highlights
Venture capital (VC) investment has attracted increasing interest from researchers and policymakers since the 1980s
The first research question that we aim to address is whether venture capital (VC)-backed firms exhibit different levels of post-initial public offering (IPO) performance and growth compared with
This study examines the effects of VC investment on the post-IPO performance and growth of Chinese entrepreneurial firms
Summary
Venture capital (VC) investment has attracted increasing interest from researchers and policymakers since the 1980s. It is widely believed that VC investment is a good way to fill up the funding gaps faced by young R&D-oriented ventures, and stimulate national innovation and economic growth (Bygrave 1987, Gompers and Lerner 1999). Since the 1980s, many nations in Europe and Asia have begun to initiate public programs to stimulate VC activities.. 114 ASIAN DEVELOPMENT REVIEW institutions, undertaking regulatory changes in pension funds and insurance funds management, and building up secondary stock markets).. The People’s Republic of China (PRC) numbers among the many countries that have made an effort to develop a vibrant VC industry to stimulate innovation. Starting from the mid-1980s, the government has initiated various programs to promote VC investment including injecting venture funds into government-controlled VC firms (VCFs), encouraging corporate VC arms, and attracting foreign venture funds. The country’s VC industry has developed dramatically over the past 2 decades
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