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From “Super App” to “Super VC”: The value-added effect of China's digital platforms

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  • Wang, Jiancheng
  • Li, Xiaoye

Abstract

This paper studies China's big digital platforms’ value-added effect as venture capitalists, using a dataset of companies registered in China that eventually reach the initial public offering stage. We find that China's digital platforms’ investments positively affect their portfolio firms’ IPO performance, in terms of higher IPO valuation, lower underpricing, and shorter time to reach the IPO stage, which is inconsistent with the grandstanding hypothesis. The plausible underlying channels are the certification and monitoring roles played by China's digital platform. The results remain robust after addressing several concerns. Our study sheds new light on VCs’ characteristics and digital platforms’ activities.

Suggested Citation

  • Wang, Jiancheng & Li, Xiaoye, 2023. "From “Super App” to “Super VC”: The value-added effect of China's digital platforms," Finance Research Letters, Elsevier, vol. 54(C).
    • Handle: RePEc:eee:finlet:v:54:y:2023:i:c:s1544612323001460
    DOI: 10.1016/j.frl.2023.103773
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    More about this item

    Keywords

    Digital platforms; New ventures; Venture capital; Value adding; IPO performance;
    All these keywords.

    JEL classification:

    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship

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