Venture Capital Institutions and Venture Capitalists’ Investment Activities: An Empirical Study on China

摘要

This thesis explores institutions under which venture capital investmentudoperates in China and whether and how these institutions affect venture capitalists’ud(VCs) investment preferences, ex-ante project screening strategies, and ex-postudmonitoring activities in China. Based on an analysis of about 50 unstructured andudsemi-structured interviews and an examination of more than 800 venture capitaludbacked deals, this study finds that regulations on corporate governance impactudVCs’ investment activities in China. Due to regulatory restrictions, most foreignudventure capital firms are structured under limited partnerships, whereas alluddomestic venture capital firms (VCFs) are structured as limited companies inudChina. The difference in corporate governance of VCFs heavily affects VCs’udinvestment strategies in China. VCFs under limited partnerships show more risktakingudcapability than those structured as limited companies by investing more inudyounger projects with higher R&D intensity. Associated with the difference inudinvestment preferences, VCFs under limited partnerships employ stage financingudmore frequently than those structured as limited companies do. At the same time,udthe stage financing strategies deployed by VCFs under limited partnerships areudclosely related to agency problems and transaction uncertainties. The more seriousudagency problems are the more intensive stage financing will be. However, VCFsudstructured as limited companies rarely employ stage financing and there is noudvisible pattern shown in their stage financing arrangements. Finally, similar to theudpractices in developed countries, VCs in China also take human capital factors asudthe utmost important criteria. However, they are more demanding in projectudscreening by imposing additional criteria. Further, VCFs under limitedudpartnerships are more demanding and more sensitive to market growth rate andudfinancial returns, and more concerned about public policies. These results may beudexplained by the weak regulatory institutions in China and the incentives providedudby different governance structures. VCFs structured as limited companies areudorganized hierarchically. Their incentive structure is designed to discourage riskudtaking and responsibilities. VCFs under limited partnership are more independentudin governance that their incentive structures are designed to encourage risk takingudand responsibilities.