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Can venture capital shareholding improve M&A performance? An empirical study based on Chinese GEM-listed companies

Author

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  • Kun Chao
  • Meijia Wang
  • Yanyong Hu
  • Shixue Wang

Abstract

Existing studies have explored the impact of venture capital shareholding on the GEM-listed companies before and after listing from multiple perspectives. However, there has been limited research on the influence of venture capital shareholding on these companies’ mergers and acquisitions(M&A) activities and performance. Additionally, two conflicting research findings have been presented in limited relevant studies. In order to clarify the mechanism by which venture capital shareholding affects M&A activities and performance of GEM-listed companies and verify existing research conclusions, this paper takes 468 M&A events completed by the acquirer of China’s GEM-listed companies between 2014 and 2016 as samples to explore venture capital shareholding’s effects on the M&A performance of GEM-listed enterprises. The empirical findings demonstrate that GEM-listed enterprises with venture capital shareholding perform significantly better in terms of short-term and long-term M&A performance than those without; with the increase in venture capital shareholding ratio, the short-term M&A performance of GEM-listed enterprises has remarkably improved, but the long-term M&A performance does not show obvious correlation; joint investment of venture capital can significantly improve the short-term M&A performance of GEM-listed enterprises, but it has no substantial influence on long-term M&A performance. Based on further analysis of the empirical study, it is concluded that the common one-share ownership structure of GEM-listed enterprises is not conducive to the play of the monitoring function of venture capital, and the insufficient incentives and free-riding thinking also weaken the motivation and input of some venture capital shareholders to provide value-added services. This study systematically elucidates the mechanism and impact of venture capital shareholding on the M&A performance of GEM-listed companies, addressing the shortcomings in existing research. It is conducive for GEM-listed companies to gain a rational understanding and effectively leverage the active role of venture capital shareholders in M&A activities.

Suggested Citation

  • Kun Chao & Meijia Wang & Yanyong Hu & Shixue Wang, 2024. "Can venture capital shareholding improve M&A performance? An empirical study based on Chinese GEM-listed companies," PLOS ONE, Public Library of Science, vol. 19(8), pages 1-17, August.
    • Handle: RePEc:plo:pone00:0308932
    DOI: 10.1371/journal.pone.0308932
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    References listed on IDEAS

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