Venture Capital Institutions’ Impact On Investment Behavior And Performance Of Invested Companies

After opening up in2009, the Chinext market develops very fast. The finish of split share structure reform and the establishment of multi-level capital market result in the rapid development of China’s venture capital industry. Researching the venture capital’s impact on investment behavior and performance of invested companies is of high significance. However, the research in this field is scarce.Choosing companies listed in Chinext market in2009and2010as sample, this paper investigated venture capital’s influence on the capital investment behaviour, R&D investment behavior and return of capital investment of the invested companies from the aspects of venture capital’s cash flow right, involvement in management, joint investment and shareholder background. The results of empirical analysis showed that venture capital firms lead the invested companies to have more aggressive capital investment behavior. To be specific, shareholding proportion of venture capital firms and proportion of directors nominated by venture capital firms are both positively related to the degree of aggressiveness of invested companies’ capital investment behavior. Venture capital firms lead the invested companies to have more aggressive R&D investment behavior to some extent. In particular, the shareholding proportion of venture capital firms is positively related to the degree of aggressiveness of invested companies’R&D investment behavior. The companies with venture capital firms of foreign controlled as largest venture capital firms shareholder have more aggressive R&D investment behavior. Venture capital firms decrease the return of capital investment of invested companies. To be specific, companies with venture capital firms as shareholders have lower return of capital investment than companies without venture capital firms as shareholders, the shareholding proportion of venture capital firms and the number of venture capital firms as shareholders are negatively related to the return of capital investment of invested companies.As a paper exploring the impact of venture capital on invested companies’ investment behavior and performance systematically, this paper made contribution to the theory of venture capital and corporate investment. In addition, this paper provide some advice on how to develop venture capital industry and how to promote venture capital to help invested company grow on the basis of the results of empirical analysis in this paper.