Venture Capital Impact Study, The Ipo On The Shenzhen Sme Board

Small and medium-sized enterprise(SMEs) is the main vehicle to convert high-tech into production force. In China, the financing channels for SMEs are too limited to provide expansion funds. But at the same time, the public hot money is too much for the capital market. The main function of venture capital is capital raising and investing; therefore, VC is the best agent connetcting ventures with private equity.Venture Capital (VC) is an intermediate external source of financing for small and medium-sized enterprises(SMEs). Extant VC studies generally agree that VC firms not only contribute funding but also provide value-added services to their portfolio companies. However, adverse selection and conflict of interests may bring negative effects to VC investments. In this study, we focus on the effects of venture capitalists' participation in IPO companies in an emerging market and provide a more realistic view through an empirical testing of models(certification/monitoring and adverse selection/grandstanding) on VC effects. It has been made sure that Venture Capital have certification effect in developed securities markets(e.g., US and Europe), But the conclusion has not been proved in new market in Asia. In this study, we empirically examine the role of VC firms in China context. A data set consisting of companies listed on the SME board in Shenzhen is collected. we analyzed the differences between venture-backed and non venture-backed companies in the small and medium-sized enterprise stock market on IPO performances. We find the effects of VC firms support the adverse selection/grandstanding models. The certification/monitoring models does not work in China.In the end we made sensible suggestions to the local VC firms, including the provision of growth enterprise board with all tradable shares; seeking new financing resources, etc.