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Does venture capitalists’ monitoring role have spillover effect? — Evidence from valuation adjustment mechanism in mergers and acquisitions

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  • Ye, Xiaojie
  • Yang, Dan
  • Yu, Ling

Abstract

This study investigates whether venture capitalists’ (VC) monitoring role has spillover effect, using the evidence of their portfolio firms’ adoption of valuation adjustment mechanism (VAM) in mergers and acquisitions (M&As). Based upon firm-level data in the Chinese secondary market, we find that VC-backed firms prefer using VAM and get higher strategic returns. Findings confirm the spillover effect. We further identify VCs as monitors through working in the portfolio firms’ decision-making positions and actively involving in negotiating VAM terms. Meanwhile, VCs act as a substitute for other large shareholders in monitoring the portfolio firms’ M&As; and domestic VCs perform better.

Suggested Citation

  • Ye, Xiaojie & Yang, Dan & Yu, Ling, 2025. "Does venture capitalists’ monitoring role have spillover effect? — Evidence from valuation adjustment mechanism in mergers and acquisitions," Finance Research Letters, Elsevier, vol. 82(C).
    • Handle: RePEc:eee:finlet:v:82:y:2025:i:c:s1544612325008657
    DOI: 10.1016/j.frl.2025.107606
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    Keywords

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    JEL classification:

    • 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

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