Abstract

https://ssrn.com/abstract=2717977
 


 



Venture Capitalists' Value-Enhancing Activities Under Weak Protection of Law


(Michael) Hui Li


La Trobe University; Financial Research Network (FIRN)

Xiaohui Wu


Xiamen University

Ying Ye


Tsinghua University

Qi Zeng


University of Melbourne - Department of Finance; Financial Research Network (FIRN)

January 19, 2016

FIRN Research Paper No. 2717977
2016 Financial Markets and Corporate Governance

Abstract:     
Using two sets of hand-collected survey data, we studied the value-adding activities of venture capitalists (VCs) operating in the weak legal environment of China. VCs exert value-enhancing efforts in addition to monitoring through trust considerations. We identified the effects of three types of trusts, strategic reputation-based (C-trust), knowledge-based (K-trust), and identification-based (I-trust), on a company’s performance while investing venture capital in China. We find that the C-trust acts only through increased use of complementary resources to improve a firm’s performance. K-trust and I-trust can also stimulate in two other ways by reducing transaction costs and improving team-spirit.

Number of Pages in PDF File: 46

Keywords: Venture Capital, Trust, Firm Performance

JEL Classification: G24, K22, L14, M13, O16


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Date posted: January 21, 2016  

Suggested Citation

Li, (Michael) Hui and Wu, Xiaohui and Ye, Ying and Zeng, Qi, Venture Capitalists' Value-Enhancing Activities Under Weak Protection of Law (January 19, 2016). FIRN Research Paper No. 2717977; 2016 Financial Markets and Corporate Governance. Available at SSRN: https://ssrn.com/abstract=2717977 or http://dx.doi.org/10.2139/ssrn.2717977

Contact Information

(Michael) Hui Li (Contact Author)
La Trobe University ( email )
Department of Economics and Finance
La Trobe University
Melbourne, 3086
Australia

Financial Research Network (FIRN)
C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia
HOME PAGE: http://www.firn.org.au

Xiaohui Wu
Xiamen University ( email )
Xiamen, Fujian 361005
China
Ying Ye
Tsinghua University
Beijing, 100084
China
Qi Zeng
University of Melbourne - Department of Finance ( email )
Faculty of Economics and Commerce
Parkville, Victoria 3010 3010
Australia
Financial Research Network (FIRN)
C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia
HOME PAGE: http://www.firn.org.au

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