Risk Investment Income Empirical Study

With combination of the morden financial theory, the real option theory, the knowledge-based theory and the morden industrial organization theory, application of the venture capital's portfolio theory has became one of the research frontiers in the financial research area. At the same time, financial investment services turned out to be more specialized, which makes venture capital firms an important class of investment organizations. Thus, management of risk and ruturn in VC firms is attracting more concerns from both industry and academy. This study is designed to measure the risk and ruturn of venturn capital investments on the perspective of venture enterprises portfolios, and to examine the factors affecting return on investments. It furtherly adds supplyment to the venture capital's portfolio theory.We mainly choose veture capital's peculiar Risk-Return Mechanism as the theoretical support of our study. Based on the guidance from empirical studies and classic literatures all over the world, we contrived a questionnaire to get a hand-collected dataset of venture capital investments. Our primary data is a comprehensive survey of all the venture capital firms in Mainland China, which we augmented with numerous secondary sources. Our empirical results from 40 samples are as follows:(1) We examine the congruences between IRR, the Expected Rate of Return from veture capitalists, and the Promised Rate of Return from entrepreneurs, using Paired-Sample T Test. The result shows that no significant differences exist between these three indexes, and the rate of return of local venture capital investments in Mainland China is in a relatively stable condition. (2) Regression results in human-capital-level variables show that: each of the education length, the working hours input and the degree of jointly R&Ds has a significantly positive impact on improving the level of IRR for VC funds. That is to say, human capital is an important determinant of IRR. (3) Regression results in organization-characteristic-level variables show that: the level of IRR turns out to be higher than that of the venture capital firms which have government shares. That is, the goals of government in promoting high-tech industrialization and in encouraging some areas to develop rapidly will sway the investment strategies of VC firms, which chould inhibit IRR. What's more, the VC firms'capitalization scale has a significantly positive impact on improving the level of IRR, indicating that ability to manage venture capital in a large amount represents a good reputation of VC firm and could serve to attract more excellent managers, and thus improve investment performence. (4) Regression results in risk-control-level variables show that: the equity propotion of VC firms, the situation of syndication, and the position of VC firms as a syndication leader, all of these show positive effection on IRR. The results show that: VC firms'rish control strategise are significant factors to IRR. (5) Regression results in risk-control-level variables show that: investments in Seed-projects will bring on higher implied volatility of return and lower the performance of VC firm. In addition, both of the jointly R&Ds between enterprises and the investments in lead/follow venture companies have positive effect on IRR. The results show that the construction strategy of VC firms'portfolio from industrial organization perspective is a determinat of IRR with vital importance.