An Empirical Study On Determinants Of Enterprises Venture Capital Return

Venture Capital (VC) has a relatively short history in China, but it embraces a promising prospect because China is a rising market with huge potential for VC investment. The last two decades witnessed rapid development of VC and enormous economic returns reaped by VC institutions. There is a growing public awareness that VC, as a newly-developed investment instrument, is playing an very important role in the national economic development, particularly the development of hi-tech industry of various countries. This paper probes into the determinants that influence the VC return in Shenzhen Medium-and-Small-Sized Enterprise Board. It is expected that this effort can be of some help in understanding further operation mechanism of China's VC market and basic characteristics of China's VC return rate, and can generates some practical implications on future development of China's VC institutions.This paper, in retrospect of previous studies in this field, combines empirical method and normative method to examine the cases of enterprise-listing involving VC participation within the timeframe of May 27,2004 when Shenzhen Medium-and-Small-Sized Enterprise Board was initiated to Dec.31,2009. Definitions were given to VC and related terms and three hypotheses were raised based on literature review and theoretical analysis. Data from various sources including www.cninfo.com.cn and www.ccerdata.com were processed and an empirical model was designed to examine the hypotheses. An empirical study was made with SPSS17 and EXCEL software for a regression analysis of VC return determinants. With the results, some tentative suggestions regarding the development of VC market are made in the light of the situation and real conditions of China.According to the results of this empirical study, VC return rate is interrelated with ROE of a start-up, and the rate is interrelated with the experience richness of a VC institution and is positively correlated with the operation duration of a VC institution, and VC return rate is correlative with the background of a VC institution in that a VC fund with foreign input tends to have higher VC return; no significant correlation was found between VC return rates and the specific industrial field or average P/E or the size of capital pool; VC return rate is correlated with the investment duration and a short-term investment tends to have a higher VC return rate. However, the adjusted R2 is 0.368 which indicates that the performance determinants this article has chosen provide relative weak explanations to differences in the VC return rates.Compared with previous studies in this field, this paper has the following highlighted merits:It uses IPO-Exit data from Shenzhen Medium-and-Small-Sized Enterprise Board VC operation to analyze the determinants that influence the VC return. The cases examined were all IPO-exit cases covering most VC projects since Shenzhen Medium-and-Small-Sized Enterprise Board was established, therefore the results can serve as a comparatively reliable interpretation of the determinants involved in medium-and-small-sized enterprise IPO VC return.