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Does distance still matter? Geographical dispersion within venture capital syndicates and IPO earnings management in China

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  • Li, Honglin
  • Oon, Elaine Yen Nee
  • Alfan, Ervina

Abstract

While venture capital (VC) investors are expected to serve as effective monitors during the IPO process, geographical dispersion among syndicate members introduces logistical barriers to collective governance. Using a sample of 954 Chinese VC-backed IPO firms from 2008 to 2019, we examine how geographical dispersion within VC syndicates affects IPO earnings management. Syndicate-level geographical dispersion is measured using a metric derived from the travelling salesman problem. We find that greater intra-syndicate geographical dispersion increases IPO earnings management. This effect is attenuated by relational closeness among syndicate members but remains unaffected by improvements in broadband networks under the staggered rollout of the Broadband China policy. Heterogeneity analyses further reveal that the effect of geographical dispersion is more pronounced in smaller, less diverse VC syndicates and in firms subject to weaker external monitoring. This study highlights that while broadband networks enhance the transmission of hard information, they cannot substitute for relational governance in distant collaborative investments, where soft information exchange is essential for collective governance.

Suggested Citation

  • Li, Honglin & Oon, Elaine Yen Nee & Alfan, Ervina, 2026. "Does distance still matter? Geographical dispersion within venture capital syndicates and IPO earnings management in China," Finance Research Letters, Elsevier, vol. 98(C).
    • Handle: RePEc:eee:finlet:v:98:y:2026:i:c:s1544612326004253
    DOI: 10.1016/j.frl.2026.109896
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