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Enhancing the efficiency of governmental intervention in the venture capital market: The monitoring effect

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  • Oh, Seunghwan
  • Jang, Pilseong
  • Kwak, Gihyun

Abstract

This study focuses on the estimation of the “monitoring effect,” which is one of the two sources of value creation (in addition to the “screening effect”), through venture capital (VC) investment. To estimate the monitoring effect excluding the screening effect, this study simultaneously uses the matching and difference-in-differences (DiD) techniques, to overcome the weaknesses of each approach. The analysis confirms the significance of the monitoring effect in enhancing various performance variables, such as corporate growth, job creation, and innovation capacity. In particular, the size of this effect is maximized in mid-stage companies and high-tech industries. The results of this study can help policymakers who aim to foster the government-led VC industry by providing them with insights regarding the importance of monitoring and identifying the characteristics of companies that can maximize the monitoring effect.

Suggested Citation

  • Oh, Seunghwan & Jang, Pilseong & Kwak, Gihyun, 2022. "Enhancing the efficiency of governmental intervention in the venture capital market: The monitoring effect," Economic Analysis and Policy, Elsevier, vol. 75(C), pages 450-463.
    • Handle: RePEc:eee:ecanpo:v:75:y:2022:i:c:p:450-463
    DOI: 10.1016/j.eap.2022.04.014
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    References listed on IDEAS

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    Cited by:

    1. Ye, Muqing & Zeng, Wei, 2024. "Government innovation preferences, institutional fragility, and digital economic development," Economic Analysis and Policy, Elsevier, vol. 81(C), pages 541-555.
    2. Qilin Cao & Anhong Hou & Xiang Li & Chunxue Jiang, 2022. "Spatial Impact of Government Venture Capital on Urbanization and Its Path—Evidence from the Yangtze River Delta Urban Agglomeration in China," Land, MDPI, vol. 12(1), pages 1-21, December.

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    More about this item

    Keywords

    Start-up venture capital; Monitoring effects; Matching; Difference in differences;
    All these keywords.

    JEL classification:

    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling
    • G3 - Financial Economics - - Corporate Finance and Governance

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