Research On The Effect Of Venture Capital Involving In Governance On Corporate Performance

Due to the information asymmetry and moral hazard exists, venture capitals usually supervise venture corporate by involving in corporate governance in order to reduce uncertainty risk. This paper analyzes the effect of venture capital involving in the SME (Small and Medium-sized Enterprises) and GEM (Growth Enterprises Market) board's governance.Firstly, we analyze the impact of venture capital involving in governance on the governance structure of SME and GEM board. The research shows that venture capital involving in governance doesn't play an effective role in improving all parts of governance structure. Venture capital involving in governance do influence the CEO duality, the average proportion of executives shares, average salary of the top three executives and the largest shareholding, while have no impact on the independent director proportion. What's more, the impact on CEO duality is inconsistent with expectation.Secondly, we test empirically the impact of venture capital involving in governance on the entrepreneurial performance from the perspectives of the profitability and the growth rate respectively. The regression results show that venture capital involving in governance can enhance the performance to a certain extent, and in the IPO year, venture capital focus more on return on profitability, and pays less attention on growth rate comparatively. The proportion of venture capital directors, the average share proportion of executives' shares and the average salary of the top three executives places a positive impact on corporate performance to some extent, while CEO duality and the largest shareholding may restrain performance. The proportion of venture capital supervisors could significantly promote profitability, while it has not much impact on the growth rate. In addition, the duration of venture investors' participation in the firm doesn't affect corporate performance. Government background may deteriorate the profitability, while may encourage growth rate. Free-riding is serious in Syndication; venture capitals don't reach a good collaboration.Totally, venture capital participating in corporate governance plays a certain role in improving governance structure and promoting performance. However, there are still many deficiencies which indicates China's venture capital industry needs perfect greatly. As a result of that, it's calling for construction of relative laws and regulations, cultivation of VC talents, while at the same time, VC organizations need to enhance capacity of there own.