The Effect Of Venture Capital And Debt Financing On The Performance Of IPO

It has been more than 30 years for the National Science and Technology Development Research Center put forward the concept of "venture capital" from 1984 in China.During these years,venture capital has experienced several ups and downs,and due to the world’s economic growth slowed and international venture capital boom in 2002,the venture capital in China went into the recuperation period.After four years of hibernation,China’s venture capital reentered a new period of development in 2006.Venture capital tends to be cautious,when the financial crisis break out in 2008,but the listed companies are still active in raising funds.Experienced the dormant time,and after the financial crisis,the Growth Enterprises Market(GEM)listed in 2009,which makes the venture capital entered a new period.Venture capital,as a kind of equity capital,is concerned with the future development of the company and the appreciation in assets value,rather than the current profit and loss of the investment object.Injection of venture capital enterprises in the growth stage will develop the market and expand the size,and temporary business performance may be negative.But in the long term returns is rich,and if they could be in the form of listed out,the benefits of upfront investment will be several times or more.Compared with venture capital,debt financing is another channel for company financing,which does not need to pay compensation for risk,but regularly repay the debt financing requirements.And managers and shareholders have a potential constraint on the company to make them consistent with the business objectives;Besides,debt interest is paid in pre-tax,which can offset a portion of the tax revenue;Thus to a certain extent,debt financing can also increase the profit of the company,improve the company’s performance,and make the companies good performance after they listed.So venture capital,debt financing as two different ways of financing,how impact the performance of the companies after listed?On the basis of reading of vast amount of literature,this paper combined with venture capital and debt financing to analysis the impact on company performance.In this paper,there are 2248 listed companies in line with the conditions on the A-share market by the end of December 31,2015,and respectively investigate the existence of venture capital,debt financing whether affect the performance of listed companies or not.The performance of listed companies is divided into two aspects:one is the short-run performance,measured by first-day’s returns;The second is long-run performance,which measured through the performance of listed five years from the secondary market.Due to first-day’s returns and first-day underpricing are equal,so we use the first-day underpricing to measure the first-day’s returns.Four quartile grouping of debt,the median grouping of debt,through descriptive statistics to study the participation of venture capital and the amount of debt financing for high and low degree of influence on IPO underpricing,so as to verify the hypothesis proposed in this paper.Secondly through the empirical analysis to study the exact amount of venture capital and debt financing on the IPO underpricing.Due to the endogeneity of variables,this paper use three-stage third least squares method and instrumental variable method to study the venture capital debt financing for underpricing.In the study of the performance of Listed Companies in the secondary market,the Fama-French three factor model was used to study the abnormal returns of listed companies from the first day to the 60 month after the listing.In addition,the momentum factor is added to the stability analysis based on the three factor.Through the empirical study the conclusions are as follows:(1)the existence of venture capital significantly reduced the underpricing;(2)the higher the level of debt financing,the lower of the underpricing;(3)the impact of venture capital on the long-run performance of listed companies is not significant;(4)the debt financing has a significant impact on the long-run performance of the listed companies,and the impact degree increases with the increase of the level of debt.The main innovation of this paper lies in:research the influence of venture capital and debt financing on the performance of all A-share listed companies by using the methods of foreign scholars.Through the analysis of the data of the whole sample,it has enriched the research results in the relevant fields at home and abroad.The analysis of this paper can also provide a certain degree of effective theoretical basis for the identification of venture capital and debt financing,and to promote the rational choice of financing channels.However,due to my research capacity is limited,this paper only study the pre-IPO debt combined financial statements of the three years and not further distinguish the source of debt,So the following two aspects can become the task of our future research:(1)the impact on the performance of listed companies,such as bank loans or issue bonds on the impact of listed companies.(2)there are many factors affecting underpricing,such as venture capital reputation is an important aspect.