Effects Of Venture Capital Institutions And Business Angel On IPO Of GEM In China

Since the GEM of Shenzhen in China was founded in October 2009, it provides an effective financing channels for enterprises, and also provides exit channels for venture capital institutions and angel investment. In recent years, the market of venture capital and angel investment in China is developing rapidly, and comes to a relatively high level in raising funds and investment scale. However, as two different types of equity investments, what exactly influence do they have on the invested enterprises? If there is a difference? These effects can be reflected on the IPO performance of invested enterprises.The research sample of this paper are GEM listing corporations in China up to December 31,2012. Through independent samples T test, multiple regression analysis and other methods, this paper studies the influence of venture capital institutions and angel investment on the IPO of GEM companies in three time dimension, and analysis the differences of two influences. The study found:Angel investors have limited impact on shareholding enterprises. Angel investment can not reduce the degree of earnings management of enterprises effectively, and also can not improve the growth rate after IPO effectively. On the contrary, it promotes the IPO under-pricing rate, and have not play the function of third party authentication. Compared with ordinary angel investors, well-known angel investors play a positive role on the operation and management of enterprises, and transmit positive information to the outside world. Venture capital institutions play a "screening oversight role" and participate in the company management actively and command the degree of earnings management. They play the role of signal and show optimistic prospects of investment enterprises to the vast number of investors. However, VC can not reduce the IPO under-pricing significantly and the role of’certification’is limited. And after IPO, the value-added effect of VC is not obvious. Joint investment of VC play a positive role on the enterprises and reduce the degree of earnings management and the under-pricing rate. But the effect on the enterprises IPO of different background VC is not significant. In general, the value-added service functions are not obvious of BA or VC. Based on the results of this study,and put forward the policy recommendations of angel investors, institutional venture capital, small and medium enterprises and relevant government departments.