The Study About The Impact Of Geographical Distance Of Venture Capital On The Tunneling Of Controlling Shareholders

Although many papers discuss the phenomenon and the reasons for the local investment of Venture capitals(VCs),there is no papers empirically test that question.This paper use VCbacked listed companies in the growth enterprise board of 2009 to 2016 as sample to explore the impact of VCs on the tunneling of controlling shareholders.The research finds that the geographic distance of venture capital is positively correlated with the tunneling of controlling shareholders,and that positive relationship is more significant in the companies with lower shareholding ratio of VC.We also find that there exists a mediating effect on the relationship between the geographical distance of VC and the tunneling of controlling shareholders with the mediating variable of debt financing.Further study finds that joint-VCs,senior managers sent by VCs and high-quality external audit can reduce their positive correlation.The extended study finds that the withdrawal of VC will cause negative market reaction,while the negative market reaction of close VC is greater than that of far VCs.The research suggests that:(1)the geographical distance of VC increases the management cost and the degree of information asymmetry,making the tunneling of the controlling shareholder more serious;(2)if the VCs attach much attention to the venture companies,they will initially take actions to reduce the negative effects of geographic distance;(3)the weaker VCs monitored controlling shareholders,the more likely controlling shareholders are to get more debt financing to tunnel;(4)joint-VCs,senior management sent by VCs and high-quality external audit can reduce the negative impact of geographical distance;(5)the stock market totally view VC as a positive signal,and the near one is a more positive signal than the far one.This is the first paper to empirically examine the relationship between the geographical distance of VCs in our country and the enterprise principal-agent risk,and to examine the market reaction of the withdrawal event of VCs,which enriches the related researches and theories,makes up for the deficiency in the literature,and provides theory reference for VCs to choose investment objects and reduce the negative impact of geographic distance.