风险投资声誉和股价“传染”效应——来自中国上市公司立案公告的证据

Journal of Financial Research

2019, Vol. 471

Issue (9): 169-187 DOI:

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Reputation of Venture Capital Firms and the Contagion Effect:Evidence from Regulatory Investigations of Chinese Listed Firms

HE Ding, LUO Wei

Business School, China University of Political Science and Law;Guanghua School of Management, Peking University

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Abstract In the economic context of widespread entrepreneurship and innovation, venture capital (VC) has become an important source of capital for innovation entrepreneurship in China. In mature Western capital markets, VC, as a specialized financial intermediary, monitors and certifies enterprises; therefore, VC investment can signal the value of venture enterprises and reduce information asymmetry. However, in recent years, there have been many negative examples of VC in China, which involved grandstanding and post-IPO deterioration of financial performance. These phenomena are related to the stage of VC development in China. Although the first financial institution in China specializing in VC investment was established in 1985, the development of VC has been slow due to the lack of a general exit mechanism in the early period. After the opening of the Shenzhen SME board in 2004 and the implementation of stock split reform in 2005, more and more VC has become available, and it has grown rapidly with economic development and inventive policies. Due to their limited experience, many VC firms in China lack professional skills. They are eager for a quick exit and instant benefits. Furthermore, under the strict restrictions on IPOs in China, entrepreneurs and limited partners may value VC firms' government background or political connections more than their professional ability, which contributes to the short-term behaviors of VC firms.
Such phenomena are common in the early stage of an industry's development. However, to ensure the sustainable development of the VC industry, an effective reputation mechanism is necessary. The professional quality of VC can be improved gradually, if there is a market mechanism to screen the quality of the VC firms, thereby developing superior firms and weeding out inferior firms. This study examines whether the reputation mechanism works in China's VC industry. There are few studies of this problem, and the conclusions are inconsistent. Some find that a VC firm's reputation improves its portfolio companies' financing environment, productivity, and merger performance; but others find that a VC firm's reputation has no significant influence on the initial return of IPOs, and is even positively correlated with earnings management at the time of the IPO. Most studies have used VC exit history to measure firm reputation. Such measures mainly reflect the progress of reputation building, but do not capture events that damage reputations. In addition, most studies have focused on the influence of firms' reputation before or at the time of the IPOs, not the reputation mechanism in the secondary securities market.
In this study, we exploit the VC reputation mechanism in the secondary securities market by studying the effect of reputation damage to VC firms on their portfolio companies. Specifically, we examine whether investigations of VC-backed listed firms by regulatory bodies lead to price declines in other firms backed by the same VC firm (related companies). Our research setting offers two advantages. First, we observe the reputation damage to VC firms. When the portfolio companies that went public are investigated by regulatory bodies, the quality of the VC firms' monitoring is challenged and their reputation is affected. Second, by observing the immediate market reactions to regulatory investigations, we exclude the influence of other factors and can posit a causal link between the reputation of the VC firms and the contagion effect.
Using a sample of CSRC regulatory events from the 2007 to 2015 period, we find the market reaction of investigated VC-backed companies is-8% around the announcements of investigation events, and the related companies' market reaction is-1.2% around the events. We also find that investors impose a larger penalty on the stock prices of the related companies backed by VC firms that have higher reputations or are more intensively involved in the operations of the investigated firms.
Our study makes several contributions. First, our research provides evidence that the reputation mechanism affects VC in China. Our results indicate that a VC firm's reputation influences the valuation of its portfolio companies even after they go public; therefore, entrepreneurs and limited partners should pay more attention to VC firms' professional abilities. Second, existing research has found that negative events in one firm can induce share price declines in other firms related by industry, supply chain, auditor and so on. We identify another stock price contagion channel: the VC firm. Third, our paper sheds light on the consequences of Chinese SEC regulation. The results show that regulatory investigations influence not only the investigated companies, but also some related financial intermediaries and companies.

Key words： Venture Capital Reputation Regulatory Investigation Contagion Effect

Received: 25 May 2018 Published: 27 September 2019

JEL分类号:	G14
	G24
	K22

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HE Ding,LUO Wei. Reputation of Venture Capital Firms and the Contagion Effect:Evidence from Regulatory Investigations of Chinese Listed Firms[J]. Journal of Financial Research, 2019, 471(9): 169-187.

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http://www.jryj.org.cn/EN/ OR http://www.jryj.org.cn/EN/Y2019/V471/I9/169

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