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The Effect of Venture Capital Investment—Evidence from China's Small and Medium‐Sized Enterprises Board

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  • Yi Tan
  • Hong Huang
  • Haitian Lu

Abstract

In this paper, we use a matched sample to empirically test the effect of venture capital investment on the companies listed on the mall and edium‐ized nterprises oard in hina. We find that hinese venture capitalists neither add value to their invested firms in the initial public offering (IPO) process nor improve operating performance. Rather, compared with their non‐venture‐backed counterparts, venture‐backed firms are associated with a greater level of IPO underpricing and inferior operating performance both before and after IPO. Our findings in hina support neither the certification/monitoring hypothesis nor the grandstanding hypothesis, but partly support the adverse selection hypothesis.

Suggested Citation

  • Yi Tan & Hong Huang & Haitian Lu, 2013. "The Effect of Venture Capital Investment—Evidence from China's Small and Medium‐Sized Enterprises Board," Journal of Small Business Management, Taylor & Francis Journals, vol. 51(1), pages 138-157, January.
    • Handle: RePEc:taf:ujbmxx:v:51:y:2013:i:1:p:138-157
    DOI: 10.1111/j.1540-627X.2012.00379.x
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