The role of angel investment for technology-based SMEs: Evidence from China

摘要

This paper comprises an empirical study on the role of angel investment in the Chinese IPO market. Using a novel dataset on 743 deals of 404 angel-backed firms from 2002 to 2013 and tracing the firms' growth history to 2017, we found that angel investment is institutionalized in the Chinese market. Based on this current situation, we develop an innovative angel investment resource factor and show that an abundance of angel resources can reduce short-term information asymmetry and generate a positive but lagging effect on SMEs' long-term performance. Furthermore, we find that these angel-backed firms have a lower stock price crash risk after IPOs, which also explains the time-lag effect of angel investment on their market performance in the early stage of IPOs. Our results are resistant to several endogeneity tests and provide insights into the multifaceted contributions to the aftermarket performance and survival of technology-based SMEs and the sustainable development of angel institutions in emerging markets.