Three essays on corporate governance and entrepreneurial finance

The central issue of my dissertation is to explore the relationship between corporate governance and entrepreneurial finance by using data from the real world. I hold the belief that the key factor for economic growth and development is the match between human capital and financial capital. Such match depends on corporate governance, which is in turn determined by a region's political, legal and cultural environments.; The first chapter studies enterprise privatization in China using data from a firm-level survey. I find that reforms targeting autonomy and incentive would be more effective if those reforms are coupled with privatization. Contrary to most empirical studies on enterprise privatization in Eastern Europe and Former Soviet Union, privatization to inside managers in China has a large and statistically significant effect on firm performances. Former managers of government-owned enterprises are generally capable to improve efficiency once they became new owners. I attribute these findings to the pre-privatization market-oriented reform in China from the early 1980s to the mid-1990s, which either induced management turnover or disciplined existing managers to update their skill mix. Since privatization to insider managers is the main politically feasible privatization method, our findings here propose one more advantage to the gradualist approach of transition: market liberalization and managerial autonomy prior to privatization may help avoid large output downfall and bring higher efficiency in the transition process.; While the first chapter explores the transformation process from government-owned firms to private ones, the second chapter studies China's de novo private enterprises. My question is how those entrepreneurs got their capital when the financial market was extremely backwards and inefficient. My answer is that social capital may play an important role in entrepreneurial finance in less developed economies such as China. I explore a unique data set to test this hypothesis. By making use of the cross-province difference regarding social capital inside China I find that, all else equal, entrepreneurs use more external finance in provinces with richer social capital, which is measured by the number of civic organizations, donations and trust. I also find that firms are more likely to be registered as limited liability corporations in regions with higher level of social capital. The policy implication is that some resources should be committed to the accumulation of social capital and trust building when governments and international organizations allocate development funds.; The third chapter is coauthored with Junfu Zhang at the Public Policy Institute of California. Our basic hypothesis is that if information asymmetry is a serious problem for entrepreneurial finance, then venture capitalists will favor those serial entrepreneurs who have revealed their true types through their prior ventures, especially those entrepreneurs with good track record. Our study is based on a large database of venture-backed companies and their founders. We find that compared to novice entrepreneurs and serial entrepreneurs who have never received venture capital before, serial entrepreneurs who received venture capital for their previous firms tend to raise more venture capital for the current firm at an early round of financing and tend to complete the early round much more quickly.