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Industrial policy and governmental venture capital: Evidence from China

Author

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  • Ge, Guoqing
  • Xue, Jian
  • Zhang, Qian

Abstract

This paper examines the role of governmental venture capital firms (GVCs) in supporting industries endorsed by the government. Specifically, we find that GVCs are more likely to invest in industries targeted by the industrial policy compared to non-GVCs. Further analyses on investment behavior suggest that GVCs make larger investments, invest in earlier rounds, and have longer holding periods in government-endorsed industries compared with non-GVCs. In terms of investment outcome, although GVCs have poorer financial performance while supporting targeted industries, they do play a positive role in promoting corporate innovation. Taken together, this paper provides novel empirical evidence on the important role of GVCs in facilitating the implementation of industrial policies.

Suggested Citation

  • Ge, Guoqing & Xue, Jian & Zhang, Qian, 2024. "Industrial policy and governmental venture capital: Evidence from China," Journal of Corporate Finance, Elsevier, vol. 84(C).
    • Handle: RePEc:eee:corfin:v:84:y:2024:i:c:s0929119923001815
    DOI: 10.1016/j.jcorpfin.2023.102532
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    More about this item

    Keywords

    Governmental venture capital; Industrial policy; Investment behavior; Investment performance;
    All these keywords.

    JEL classification:

    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • L52 - Industrial Organization - - Regulation and Industrial Policy - - - Industrial Policy; Sectoral Planning Methods

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