An Empirical Study Of Venture Capital Investment’s Impact On Chinext Stock Market IPO

On October30,2009, Chinext Stock Market opened. On the one hand, It created a way tothe capital market for the extremely growth of small and medium-sized enterprises, on theother hand, it provided more choices for the majority of investors. Chinext Stock Market’shigh price and high P/E ratio, high amount of financing, not only make it a veritable“making the rich board”, but also make Venture Capital which invest in listed companies geta huge return on investment. As IPO is the best exit way of Venture Capital, Venture Capitalwill certainly play an important role in the process of Venture Companies’ IPO.There’re two different theories conferring to Venture Capital’s impact to its investedcompanies. One is the positive impact represented by the certificate/monitor model, anotheris negative impact represented by the grandstanding model. The certificate/monitor modelsuggests that Venture Capital could improve its invested companies’ performance, andreduce costs and IPO underpircing. The grandstanding model insists that the underpricinglevel of Venture Companies is higher as the reason that some risk investment institutions,especially the immature, would like to push companies go to public as early as possible inorder to build its reputation and gain more capital for further venture capital fund.The paper have selected242companies which listed at Shenzhen Growth Enterprise Marketas study sample, Through the use of statistical analysis, the correlation test and multiplelinear stepwise regression methods, this paper examined the relationship between VentureCapital and its invested company’s performances on profitability, solvency, ability to growand operational capacity, to study performance changes before and after IPO, and IPO effectof Venture Companies. Moreover, we examine the relationship between Venture Capital andits invested company’s IPO costs and IPO underpricing, and whether Venture Capital couldprovide certification role for its invested company.Study shows that:(1) the influence of the GEM business performance indicators areinconsistent, and Venture Capital has not brought significant positive effect in terms ofperformance impact.(2) Performance of listed companies experienced a significant declinein financial aspects after IPO, however the scale of Venture Companies reduced less thanNon-Venture Companies. Venture Capital can reduce the degree of IPO effect of VentureCompanies.(3) IPO costs and IPO underpricing of Venture Companies could be lower thanNon-Venture Companies. This shows that although Venture Capital has played a role assame as certification/monitor in a certain extent, the impact of performance is not obvious. May be the purpose of immature risk investment institutions is to obtain high payment afterIPO, and do not provide much value-added services to Venture Companies.