Research On The Impact Of Venture Capital On Corporate Performance

In the past decades, extensive studies have pointed out that venture capital (VC) has a constructive influence on performance and sustainable development of the invested companies. The characteristics of venture capital, including due diligence, monitoring and supervising, can effectively promote a company’s operating performance and market performance. This viewpoint has been testified by a number of scholars researching on American and some of the European stock markets. Nevertheless, funds from VC generally are invested into high-tech industries as medium and long term equity investment. Experiencing the high risk of investment, venture capital institutions are expecting a matching high return through the exit. Strain of risk, temptation of earnings, and unanticipated change of external environment are perplexing the relationship between venture capital institutions and the invested companies. Moreover, the contribution from VCs was not as ideal as in traditional theories according to the researches on German and Australian stock markets. The stock market and venture capital industry of China are under high speed development; therefore, researching on the impact of venture capital on corporate performance is of great significance. Seeking to test the effects of venture capitals on their invested enterprises’ post-IPO performances, this paper compares performance relative indicators between VC- and non VC-backed listed companies in mainland China with principal component analysis. Before that, the radical basis function neural network succeeded in testing the effectiveness of enterprise classification and selected indicators. Last but not least, to approve the significance of venture capital on monitoring enterprise market risks, and controlling harmful volatility of share prices effectively, this paper compares the share price volatility of these two groups of companies with mean variance analysis. The empirical results indicate that venture capitals in mainland China brought undesirable effects to both operating performance and market performance, but performed well in controlling harmful volatility of share prices and monitoring enterprise market risks.