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Political ties and VC exits: Evidence from China

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  • Anderson, Hamish D.
  • Chi, Jing
  • Wang, Qing (Sophie)

Abstract

We examine whether political ties (PTs) benefit VCs in China and find a positive relationship between PTs and successful VC exits. Our findings indicate that PTs are crucial for VCs to exit via Chinese mainland stock markets and M&As. The impact of PTs depends on the nature and compositions of PTs. We document that VCs with management-level PTs enjoy greater success than those with ownership-level PTs, whereas no significant difference between central and local government PTs on VC exits. Our results remain stable after controlling for selection bias, alternative measures for VC exits, and legal and institutional differences across regions.

Suggested Citation

  • Anderson, Hamish D. & Chi, Jing & Wang, Qing (Sophie), 2017. "Political ties and VC exits: Evidence from China," China Economic Review, Elsevier, vol. 44(C), pages 48-66.
    • Handle: RePEc:eee:chieco:v:44:y:2017:i:c:p:48-66
    DOI: 10.1016/j.chieco.2017.03.007
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    Cited by:

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    3. Kshitija Joshi & Deepak Chandrashekar & Alexander Brem & Kirankumar S. Momaya, 2019. "Foreign Venture Capital Firms in a Cross-Border Context: Empirical Insights from India," Sustainability, MDPI, vol. 11(22), pages 1-20, November.
    4. Wang, Qing (Sophie) & Anderson, Hamish & Chi, Jing, 2018. "VC political connections and IPO earnings management," Emerging Markets Review, Elsevier, vol. 35(C), pages 148-163.
    5. Nawab Khan & Haitao Qu & Jing Qu & ChunMiao Wei & Shihao Wang, 2021. "Does Venture Capital Investment Spur Innovation? A Cross-Countries Analysis," SAGE Open, , vol. 11(1), pages 21582440211, March.
    6. Azzi, Sarah & Suchard, Jo-Ann, 2019. "Crouching tigers, hidden dragons: Private equity fund selection in China," Pacific-Basin Finance Journal, Elsevier, vol. 53(C), pages 236-253.
    7. Barbieri, Elisa & Huang, Manli & Pi, Shenglei & Pollio, Chiara & Rubini, Lauretta, 2021. "Investigating the linkages between industrial policies and M&A dynamics: Evidence from China," China Economic Review, Elsevier, vol. 69(C).
    8. Schweizer, Denis & Walker, Thomas & Zhang, Aoran, 2023. "False hopes and blind beliefs: How political connections affect China's corporate bond market," Journal of Banking & Finance, Elsevier, vol. 151(C).
    9. Yanzhao Li & Ju-e Guo & Shaolong Sun & Yongwu Li, 2022. "How time-inconsistent preferences influence venture capital exit decisions? A new perspective for grandstanding," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 8(1), pages 1-24, December.

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    More about this item

    Keywords

    Venture capital exits; Political ties; Institutions; Transitional economy; China;
    All these keywords.

    JEL classification:

    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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