A Study On The Impact Of Venture Capital To Corporate Governance And Performance Of SMEs

In China, venture capital was started in the1980s. In recent years, this industrydeveloped rapidly, especially after the SME board and GEM launched, the numberof VC institutions and investment scale were showing explosive growth. Venturecapitals primarily focus on high-tech and high-growth SMEs. They provide notonly new financing channel for SMEs, but also some value added services andsupervision. Therefore, research on VC’s impact on SMEs can promote healthyand orderly development of these enterprises. Venture capitals also contribute tothe development of China’s high-tech industry, promoting industrial restructuringand improving economic growth quality.On the basis of theoretical summary and review of the related literatures, this paperstudy on VC’s impact to SMEs’ corporate governance and performance. Thesample is IPO enterprises on SME and GEM board from2009-2011. In theresearch,we use descriptive statistics and regression analysis. The empirical resultshows that the participation of VC can enhance the corporate governance of SMEsto some extent. Those SMEs which has VC backed have higher proportion ofindependent directors, lower ownership concentration and higher managementincentive level. The participation of venture capital also has impact on theperformance of sample enterprises, especially on the profitability and viability. Theimpact on development ability is not significant. In addition, the study of thecharacteristics of venture capital shows that co-investment have no significantimpact on the corporate governance and performance of SMEs.