Study On Exit Timing Of Venture Capital In China

In the modern society, science and technology innovation has become an important symbol of a country's core competitiveness. With the improvement of the international science and technology and the increasing competition, all countries try hard to improve their comprehensive national strength through technology innovation. Science and technology innovation has increasingly become the test of the development level of a country. Prime Minister Li Keqiang made it clear that it is very important to promote the entrepreneurship and innovation, accelerate technological improvement facilitating social development in the 2016 government work report. Undoubtedly, this will rapidly promote the development of science and technology innovation in our country.Venture capital plays an irreplaceable role in promoting science and technology innovation of small and medium-sized high-tech enterprises in our country. Different from the traditional investment, venture capital corporates pay more attention to the enterprises with high and new science and technology and have more potentiality. Venture capital corporates have begun to digging the enterprises which have the development potential when the market has not noticed. So the first round of venture capital investment has generally completed when the innovative companies still in its instruction period. In terms of innovative high-tech enterprises, the assets of the company is on a smaller scale, and the development direction of the enterprise is set towards the orientation of light assets, and the company personnel is mainly constituted by high-tech talent, and the internal control structure is single. At the same time, the high and new technology industry upgrading is very fast, and the development direction is uncertain. The above conditions result in that the high and new technology industry has the biggest risk in the all industries in the world. Therefore a hi-tech enterprise in the initial is difficult to get financial support through banks and other traditional financing channels. So the combination of venture capital and high-tech industry is a necessity. Although the purpose of venture capital enterprises is to grab the excess of investment income, there is no doubt that the venture capital plays an important role in deciding between life and death for the high-tech enterprises in initial. Because of the venture capital enterprises having the advantage of capital and channel, the venture capital enterprises can provide funds and business support for venture enterprises when it is necessary. In addition, the venture capital enterprises have accumulated rich experience in corporate governance and business consulting, and can provide suggestions in company's operation and the enterprise's direction foe the ventures. So in some way, introducing venture capital enterprises is also the requirement of high and new technology enterprises.Like other economic subject, the purpose of venture capital enterprises is to obtain investment returns. Venture capital companies will conduct an independent rational investment, and decide the amount of venture capital and the time of investment, according to their own situation and the characteristics of the venture companies. Unlike other investment subject, the fundamental purpose of the venture capital companies is to grab the super high yield through undertaking ultra-high investment risk, which determines that the venture capital company has its unique mode of operation. Venture capital enterprises will lead into the venture enterprise at the time of initial and along with the development of venture enterprise. But the risk investment enterprises not always stay in venture enterprises, venture capital enterprises will quit at the right time in the right way. And the investment returns are realized through the final exit. Experience shows that since entering the risk enterprise risk investment to the final exit, the entire process takes about 5 to 7 years to complete.Generally, there are four kinds of the exit for venture capital:repo, liquidation, agreement transfer and IPO,and IPO is the ideal way of exit. First, when the venture enterprises become a listed company after IPO, the capital market can truly price the venture enterprise and reflect the enterprise value on the company's share price. Second, investors have a kind of expected for venture enterprises after the IPO, and such expectations will be reflected in the price of risk enterprise. When the shares held by the venture investment company are sold to other investors, the value of this part will become investment income for the venture investment companies. Third, enterprises became public after the IPO, venture enterprise will face many investors, and the venture capital can more easily find the counterparty and will be able to occupy the active position in the process of trading, which greatly improves the efficiency of venture capital enterprises exit. Finally, the liquidity of venture companies' shares will increases after becoming a public company, and the transaction cost is reduced no matter the venture capital enterprises sale the shares to public or sold back to the venture enterprise.From the view of venture capital enterprises, venture capital is a process of continual circulation from the capital input to exit. The exit of venture capital is the end of one investment cycle, and it is also the beginning of the next investment cycle. So the successful exit of venture capital plays a decisive role for the cycle of venture capital, and exit time of venture capital is particularly important.From the perspective of venture enterprise, once the venture capital exit, venture enterprises will have difficulty in getting further financial support from venture capital firms, and must rely on themselves to develop business. Theory research has showed that the exit of venture capital will cause the collapse in prices of venture companies, which will be unfavorable for investors and companies. So to make sure exit timing is very important for both venture capital companies and venture companies.Based on that venture capital enterprises can decide the exit timing of venture capital quit from venture enterprises, this paper researches the exit timing of venture capital quit and makes empirical analysis on the growth enterprise market as the research object in our country.This paper is divided into five chapters:the first chapter is the introduction; this part firstly introduces the background of venture capital in China and puts forward the thesis of this paper. Then I expound the research significance of this paper, and determine the research object of this article. The second chapter mainly introduces the theory of venture capital research and the literature review. In this chapter, I mainly introduce the meaning of venture capital and venture capital exit, and the reason of the venture capital exit and the basic theory of venture capital exit and the exit-timing of venture capital, and discuss the domestic and foreign research status of venture capital exit timing and scholars' research conclusion, and make a comment on the characteristics and deficiencies of scholars' studies. The third chapter first introduces the sources of data and the selection standard as well as the validation rules of venture capital exit, and establishes the research model of this paper. In the model establishment, I describe the theoretical foundation of the survival analysis and introduce the survival analysis, accelerated Failure survival analysis model and the basic principle of the Bayesian survival analysis and the Cox proportional hazard model, and then I discuss the advantages and disadvantages of each model. The fourth chapter is part of the empirical analysis. Through the empirical analysis I determine the factors that affect China's venture capital exit timing. The last part of the article is the conclusion, which summarizes the research conclusion and the deficiency of this article, and puts forward the policy suggestions and the development direction in the future.Through theoretical analysis and empirical research, this paper found that:(1) The venture enterprise's long-term solvency can help keep the venture capital in the company, and with short-term debt paying ability enhancement, the venture capital enterprises are more likely to quit. The reason is that the venture capital enterprises pay more attention to the venture enterprises' stage of development, and the strength short-term solvency indicates that the venture enterprises have developed into a relatively mature period, and development speed will drop. At this time, the venture investment company is considering pulling out.(2) The venture capital will focus on venture enterprises' operation ability and profit ability. When the venture enterprise' operating ability and profitability improve, the time that the venture capital kept in the venture company will increase. This is because that when the venture company' operating capacity and profit increase, it will bring more return for the shareholders.(3) The venture capital enterprises will focus on the return of venture capital investment, that mainly performance on the change of stock price.(4) Too much debt application and high financial leverage could speed the exit of venture capital. The reason maybe that after the venture company becoming a public company, the venture capital enterprises more hope to lower leverage and guarantee the stability of the financial situation, which will helps the venture capital enterprises to negotiate with the other shareholders or institutions to transfer their shares. When the financial leverage of venture enterprises is at a low level, venture capital can exit more easilyThis article maybe has the following shortcomings in the process of studying:Venture capital enterprises complete their quits through selling shares in the secondary market many times, and that situation is left of consideration. And the venture companies' financial reports will not be disclosure until the end of the quarter, which will induce some certain error. There may exist many other factors affect venture capital exit timing which is not considered in this article. All these shortcomings may be the development direction of later researches.