An Empirical Analysis Of VC’s Impact On Corporate Capital Structure

Venture capital in China started late from the90’s of the last century, with thesubstantial development of Chinese capital market. The research on venture capital alsostarted late. But with more and more venture capital institutions get into the businessstart-up stage, to provide funding for start-ups and growth, venture capital plays animportant role in the companies’ successful IPO and on their development and growth.More and more people are aware of the importance of venture capital. Research onventure capital has also become a hotspot of scholars. But with the high IPOunderpricing, corruption of VC and PE follow close on succession, it also raisedquestions about whether venture capital can create value for the enterprises or not.In response to this question, this paper tries to research on whether venture capitalcan help to improve enterprise value or not. Based on reading lots of literature, thiswriter uses the method of combining the normative research and empirical researchtogether. Using various statistical methods, with the help of SPSS software and EXCELsoftware, capital structure is selected as a perspective. First is the use of factor analysismethod to calculate the comprehensive score of enterprise value. Then get theregression model of capital structure and the enterprise value, and find out the optimalcapital structure with the enterprise value maximized based on it. Then a comparativeanalysis on capital structure with respect to whether there is significant differencebetween with and without venture capital to enter the listed corporations, or whether itis more likely for the listed corporations’ capital structure to be in the optimal capitalstructure area, which shows whether venture capital is the enterprise value creator orenterprise value predator. And further comparative analysis is on whether there isdifference on the influence degree between joint investment and single investment.Empirical results show that:(1)Venture capital helps the listed corporations tomaintain a more reasonable capital structure, that is to say venture capital helps toincrease enterprise value. As to its mechanism, on one hand, venture capital canconstraint over-investment behavior of the invested company’s management layerthrough its oversight role; On the other hand, venture capital can also provide financingwhen the invested company is facing investment opportunities, reduce informationasymmetry between managers and exterior investors, so as to reduce the financing cost,reduce the investment shortage. So venture capital can help to optimize the capitalstructure of invested company to increase the enterprise value.(2) For the industries with strong dependence on capital, such as wholesale and retail industry and agricultureindustry, the influence on optimize capital structure of joint investment venture capitalis more obvious relative to the single venture; For the industries that depend highly onthe other aspects, like science and technology, public relations and other factors, such asinformation and technology industry and communication and culture industry, there isno obvious difference between joint investment venture capital and single investmentventure capital on the influence of optimize capital structure. Venture capital firmssometimes get a portfolio of projects through joint investment, to reduce the risk degreeof commitment to a single investment project, especially for the Vc firms in thecondition of limited resources, to participate in more projects, so as to achieve thepurpose of diversification of investment risk. On one hand, joint investment can solvethe problem of inadequate capacity of single Vc firm funds and to achieve resourceadvantage, such as provide more resources in the management consulting, marketingnetwork and technical support to the invested enterprises. On the other hand, if theinvestment companies involve too much in the daily management of enterprises in ajoint venture investment, friction between organizations will lead to low efficiency, andis unfavorable to the development of the invested enterprise. This paper believes thatjoint investment of venture capital has more significant effect on solving the problem ofinsufficient investment brought by the listed corporation’s internal cash flow shortage.Therefore, as the empirical results show, for the industries with strong dependence oncapital, such as wholesale and retail industry and agriculture industry, the influence onoptimize capital structure of joint investment venture capital is more obvious relative tothe single venture; for the industries that depend highly on the other aspects, likescience and technology, public relations and other factors, such as information andtechnology industry and communication and culture industry, there is no obviousdifference between joint investment venture capital and single investment venturecapital on the influence of optimize capital structure.