Research On The Relationship Between Enterprise Growth Factors And Venture Capital Return – Evidence From China Gem

This paper uses China GEM companies with venture capital investment as research sample, studies the relationship between the enterprise growth factors and the venture capital return.Specifically, we summarize current literatures and introduce the enterprise growth factors, and quantify the enterprise growth factors by factorial analysis and grey relational analysis. Enterprise growth mainly concentrates on 5 major growth factors: profitability, solvency, operating capability, cash flow and creativity, which contain 11 sub-elements. We study the relationship between these 5 growth factors and the venture capital return. The empirical results confirm that there is a positive correlation between enterprises growth and venture capital return. We then create a composite growth indicator and show that this composite indicator has significant relationship with venture capital return. Furthermore, according to the stage of the venture capital investment, we divide the sample firms into three types: Venture Capital(VC), Private Equity(PE), and Brokers Direct Investment(BDI), and studied the relationship between the composite indicator and the venture capital return under three groups. Our findings are:(1) Among the five growth factors, only three growth factors(profitability, operating capability and creativity) have significant positive impact on venture capital return, the rest two growth factors(solvency and cash flow) have no significant relationship with venture capital return.(2)There is significant positive correlation between enterprises growth and venture capital return.(3) We create an optimized composite growth indicator include the three significant factors, and show that the optimized growth indicator is significantly related to venture capital return.(4) Through the Grey Relational Analysis, we found that enterprise growth factors show no significant different impact on venture capital return.(5) Enterprise growth factors show different impact on venture capital return under different stage. Some suggestions are given based on the research results.