Venture capital and corporate financialization: Evidence from China

Hongji Xie, Cunzhi Tian and Fangying Pang

The Quarterly Review of Economics and Finance, 2024, vol. 93, issue C, 119-136

Abstract: We examine whether and how venture capital investors (VCs) affect corporate financialization in post-IPO stages using China’s A-share non-financial listed firms from 2007 to 2019. We find that the presence of VCs reduces the level of corporate financialization. The negative relationship is more pronounced in VCs with private ownership and portfolio firms with poor corporate governance. Further evidence shows that the negative effect of VCs on corporate financialization is driven by VCs through stronger corporate governance engagement, indicating a monitoring channel. We also find that VCs exhibit a high level of failure tolerance and innovation promotion by decreasing the sensitivity of CEO turnover to compensation performance, and promoting R&D investment in firms with a stronger arbitrage incentive, suggesting another innovation channel.

Keywords: Venture capital; Managerial myopia; Financialization; Non-financial enterprises (search for similar items in EconPapers)
JEL-codes: D22 G24 G34 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:quaeco:v:93:y:2024:i:c:p:119-136

DOI: 10.1016/j.qref.2023.12.002

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