The Role Of Venture Capital In Corporate Governance

China’s venture capital market has flourished in the past two decades.As a kind of active institutional investors,venture capital has high expectations in improving the governance level of listed companies and improving the overall quality of listed companies.However,theoretical studies are still inconclusive as to whether venture capital can improve the governance level of listed companies in the context of China.The existing literature on the role of venture capital governance mainly focuses on the pre-IPO stage and is mostly based on mature capital markets.The research on the role of venture capital in supervision and governance after the successful IPO of the invested company is limited,and the research conclusions are based on mature markets.Whether it applies to emerging market countries remains to be tested.More importantly,the correlation between venture capital holdings and the improvement of corporate governance of listed companies may be the result of the governance role of venture capital,or it may simply be that venture capital has selected high-quality companies to invest in,and the existing evidence is not enough.Based on the Chinese context,this paper selects relatively exogenous experimental scenarios to identify the governance effect of venture capital in listed companies under the premise of controlling the equity relationship between venture capital and its investee companies.The governance participation of venture capital in listed companies depends on its ability to supervise and its trade-off between benefits and costs.This paper first discusses the energy allocation and governance participation of venture capital from the perspective of income.Using the CSRC’s IPO suspension as an experimental scenario,this paper finds that the IPO suspension policy will distract the affected venture capitalists,thereby weakening the supervision of their portfolio companies and aggravating their portfolio companies’ excessive investment behavior.Secondly,this paper uses the experimental scenario of the opening of high-speed rail to study the governance effect of venture capital from the perspective of cost.This paper finds that the opening of the high-speed rail will reduce the cost of venture capital to supervise the invested companies on the spot,thus increasing the participation of venture capital in corporate governance activities,better playing a supervisory role,and inhibiting the "Tunneling" behavior of controlling shareholders.Furthermore,from the perspective of improving the supervision ability of venture capital,this paper explores the inhibitory effect of venture capital on corporate violations.This paper finds that venture capital directors can learn from past experiences.After experiencing violations by other companies in the previous year,they are more actively involved in corporate governance practices in the next year,reducing the probability of corporate violations.The theoretical contribution of this paper is that it provides evidence support for the Chinese context for studying the role of venture capital in corporate governance,and provides a new exogenous scenario for empirically examining the causal relationship of venture capital improving corporate governance.In a practical sense,this paper also provides a basis for the government to formulate relevant policies and correctly guide and play the governance role of venture capital.