Managerial oversight and policy alignment: evidence from management fee premiums in Chinese government venture capital

Guoping Shi, Yuchen Tao, Yuan-Teng Hsu and Ting Feng

Managerial Auditing Journal, 2026, vol. 41, issue 7, 1335-1360

Abstract: PurposeThis study aims to investigate whether government limited partners (LPs) incur higher management fee costs than private investors when participating in venture capital (VC) funds within China’s Government Venture Capital Guiding Funds (GVCGFs) system. It also examines how aligning GVCGF policy objectives with VC fund managers’ investment preferences can mitigate these costs, and whether these effects vary across organizational and regional contexts, providing insights into the fiscal efficiency of public capital deployment in VC markets.Design/methodology/approachA hand-collected sample of 127 VC funds established between 2010 and 2020 that received investment from Chinese listed companies is used to examine management fee terms disclosed in limited partnership agreements. Regression analyses are conducted to estimate the effect of GVCGF participation on management fees. Instrumental variable estimation is used to address endogeneity concerns, while robustness tests and heterogeneity analyses are conducted to assess the stability and boundary conditions of the results.FindingsGovernment LPs incur significantly higher management fees during the investment period compared to private investors. This fee gap narrows when GVCGF policy objectives align more closely with VC managers’ industry, stage and regional investment preferences, highlighting the role of alignment in improving the fiscal efficiency of public capital. Heterogeneity analyses further show that the fee gap is smaller for state-owned VC firms and in regions with lower levels of marketization.Originality/valueThis study shifts focus from performance outcomes to cost structures in government-backed VC, offering novel empirical evidence on management fee disparities in a major public VC setting. It further shows that management fees can reflect the monitoring and coordination costs associated with policy-constrained public capital. By identifying alignment between public objectives and market expertise as a key mechanism for cost reduction, the study provides practical guidance for improving fiscal efficiency and governance effectiveness in hybrid public-private investment models.

Keywords: Management fee; Government-backed venture capital; Venture capital fund; Limited partnership (search for similar items in EconPapers)
Date: 2026
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Persistent link: https://EconPapers.repec.org/RePEc:eme:majpps:maj-01-2026-5189

DOI: 10.1108/MAJ-01-2026-5189

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