Does Foreign Venture Capital Provide More Value‐Added Services to Initial Public Offering Companies in China?

17 Pages Posted: 23 Mar 2016

See all articles by Yin He

Yin He

University of International Business and Economics (UIBE) - School of International Trade and Economics

Bin Li

University of International Business and Economics (UIBE) - School of International Trade and Economics

Yunhua Tian

Guangdong University of Foreign Studies

Lijun Wang

Beijing Technology and Business University - Business School

Date Written: March–April 2016

Abstract

This paper uses all 1404 initial public offerings (IPO) undertaken between 2002 and 2012 in China to analyze whether venture capital (VC) investment, especially foreign VC investment, brings more or less value‐added services to the invested companies during the 3 years following the IPO. The results show that venture capitalists choose to invest in companies with higher value potential, and, in turn, the value of the companies increases after the IPO is undertaken; foreign VC adds more value to companies than domestic venture capital. However, the profitability of VC‐backed and non VC‐backed companies after IPO does not differ significantly. Nevertheless, it is shown that VC plays an active role in China.

Keywords: China, foreign venture capital, initial public offering, profitability, value

JEL Classification: F21, G24, G32

Suggested Citation

He, Yin and Li, Bin and Tian, Yunhua and Wang, Lijun, Does Foreign Venture Capital Provide More Value‐Added Services to Initial Public Offering Companies in China? (March–April 2016). China & World Economy, Vol. 24, Issue 2, pp. 90-106, 2016, Available at SSRN: https://ssrn.com/abstract=2753318 or http://dx.doi.org/10.1111/cwe.12152

Yin He

University of International Business and Economics (UIBE) - School of International Trade and Economics ( email )

10 East Huixin Street
Chaouang District
Beijing, 100029
China

Bin Li

University of International Business and Economics (UIBE) - School of International Trade and Economics ( email )

10 East Huixin Street
Chaouang District
Beijing, 100029
China

Yunhua Tian (Contact Author)

Guangdong University of Foreign Studies

Collaborative Innovation Center for Silk Road
Guangzhou
China

Lijun Wang

Beijing Technology and Business University - Business School ( email )

11/33, Fucheng Road
Beijing, 102488
China

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