EconPapers    
Economics at your fingertips  
 

Venture capital certification and customer response: Evidence from P2P lending platforms

Emma Li, Li Liao, Zhengwei Wang and Hongyu Xiang

Journal of Corporate Finance, 2020, vol. 60, issue C

Abstract: This paper examines whether the certification effect of VCs extends to firm's potential customers, and whether, by certifying firms' values to potential customers, VCs provide value to firms. Using weekly trading data from P2P lending platforms in China, we find that the amount of loans facilitated and the number of lenders increase significantly by 25.7% and 49.3%, respectively, immediately after announcements that P2P lending platforms obtain VC investment. We find that this certification effect increases with measures of VC reputation and measures of information asymmetry between P2P lending platforms and potential customers. A difference-in-differences analysis provides consistent results, which are robust after controlling for the effects of news, advertising, and funding. We also document that VC-backed platforms are less likely to default than non-VC-backed platforms. This result provides indirect evidence that VC backing has long-term benefits beyond the news and advertising effects.

Keywords: Venture capital certification; P2P lending platform; Information asymmetry (search for similar items in EconPapers)
JEL-codes: G23 G24 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0929119919300884
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:corfin:v:60:y:2020:i:c:s0929119919300884

DOI: 10.1016/j.jcorpfin.2019.101533

Access Statistics for this article

Journal of Corporate Finance is currently edited by A. Poulsen and J. Netter

More articles in Journal of Corporate Finance from Elsevier
Bibliographic data for series maintained by Haili He ().

 
Page updated 2020-05-09
Handle: RePEc:eee:corfin:v:60:y:2020:i:c:s0929119919300884