The Acting Factors Of The Growth Of Firms Listed In China’s Growth Enterprise Market

China’s Growth Enterprise Market (GEM) was built to cultivate and promote the growth of new ventures. GEM is the cardinal platform to support China’s independent innovation strategy. It is also an important market for venture capital. Scholars and investors pay more and more attention on the study of venture capital, which drives the growth of firms listed in GEM, as many of these listed firms experience high growth and become highly profitable this years. Instinctively, venture capital focuses on the ability of firm growth. It actively participates in trading in GEM and is regarded a promoter of the economic development and the firm growth. It provides not only funds to firms looking for financing but also some services, to add value to the firms and encourage their growth, by taking advantages of its organization’s features.The studies on venture capital and firm growth are hotspots respectively. There are plenty research results in both theoretical and practical fields. However, the study on the relationship of China’s venture capital and firm growth is rare and there is no unified and systematic conclusion. After studying theexisted research findings, the author believes there are three kinds of deficiencies on the study. Firstly, the study is primarily evidenced form data of publicly held companies listed in Shanghai Stock Exchange(SSE), Shenzhen Stock Exchange (SZSE) or small and medium-sized enterprises board. GEM was built three years ago. There is almost no such study based on samples from GEM. GEM is in the starting stage and relative laws and regulations are not perfect. Therefore, whether conclusions for the formers are proper or not needs to be tested. Secondly, SZSE decides to take the growth rates of main business income and net profit as benchmarks of firms’ growth ability. So far, the universal framework to evaluate firms’ growth ability has not been conclusively built. Wildly adopted evaluating frameworks may be not proper in GEM. Finally, the conclusions for the relationship between venture capital and firm growth, i.e., whether the involvement of venture capital would affect the growth of firms, how it affects and to what extent it affects, still need further analysis.Therefore, this study of firms listed in GEM is based on the analysis of influences of venture capital on the growth of invested firms. Specifically, the study is from the perspective of venture capital mechanism. This study gains some academic significance and practical value. The research will firstly focus on whether the involvement of venture capital would affect the growth of firms by relative analysis and univariate analysis. If the answer is yes, then which characteristics of venture capital affect the growth of firms listed in GEM. The study includes the followings:Chapter One:Introduction. This chapter includes background, significance, methods and considerations, and characteristics.Chapter Two:Overview of Theoretical Principles and Risk. Firstly, keywords, such as venture capital and firm growth, are defined. Then, theoretical principles are introduced. Finally, the conclusion about the relationship between venture capital and firm growth is briefly discussed. Based on the discussion, the direction of this study is decided.Chapter Three:Hypothesis. Based on the existing research findings, the hypothesis about the relationship of venture capital and firm grow is presented.Chapter Four:Research Design and Model. According to the hypothesis, the research variable and model are chose and defined.Chapter Five:Empirical Study and Analysis. Firstly, the author conducts preliminary data processing, eliminates abnormal samples and make sure the data are valid and reliable. Secondly, author builds exploratory factor analysis (EFA) model and regression model based on the benchmarks about firm growth suggested by SZSE and the hypothesis presented above, respectively. Next, factor analysis and regression model are used to examine the goodness of fit. The results are used to improve models chose in order to reach the requirements of the composite research. Finally, the author uses SPSS software to conduct descriptive statistic, mean value analysis, variance analysis, univariate analysis, correlation analysis and regression analysis. The results are used as proofs ofinfluences of venture capital firm growth.Chapter Six:Conclusion and Outlook. Based on the hypothesis and analysis, the author reaches the conclusion and the outlook.Based on the analysis, the author draws the following conclusions:Firstly, the author regards the growth rate of main business income, the growth rate of net profit and the combination of the two as substitute variables in order to discuss the effects of venture capital investing in firms listed in GEM. The analysis suggests the involvement of venture capital has significantly positive effect on firms’growth ability, main business income and net profit by comparison of means, variance analysis and univariate analysis. The result of regression analysis shows there are positive correlations between involvements of venture capital and firm’s growth ability and involvements of venture capital and the growth of main business income. However, there is no obvious such positive correlation between involvements of venture capital and the growth of net profit. The possible explanation is these public held firms manipulate their net profits so that the data may not be objective. Overall, the involvement of venture capital is able to improve firms’ growth ability.Secondly, Government background is one of attributes of venture capital. It is positive correlated with firms’ growth ability. the growth rate of main business income and the growth rate of net profit. It implies venture capital with government background promote the growth of firms listed in GEM. The main reason is that this kind of venture capital is fully reinforced and potentially with more political recourses to support the invested firms. The result proves that government background is one of the production capabilities in China.Thirdly, there is a negative correlation between the percentages of shares held by venture capital and firms*growth ability. The possible explanation is that the higher the percentages of shares held, the greater power venture capital get to control invested firms. In order to get higher return, venture capital intents to increase the discount rate of stock prices so that it may focus on shout-term instead of long-term growth of firms.Fourthly, the reputation of venture capital, numbers of cases venture capital handling and participation of venture capital in the board of invested forms promote the firms’growth ability and the growth rate of main business income, but not the growth rate of net profit. It implies not only that there is the possibility of manipulation of net profit but also that venture capital value more about firms’ long-term developments instead of the short-term profitability. After long-term development, the firms’ fair value will be increased and then venture capital get higher rate of return. This matches the purpose of its investment.It is a challenge with significant meanings to analysis evidenced from the analysis of venture capital mechanism. However, the author is limited by the academic ability and the scope of knowledge. There are some deficiencies, which affect the study’s academic and empirical effects. Therefore, the author summaries the research and proposes three further study directions in the end.