Does venture capitalists’ monitoring role have spillover effect? — Evidence from valuation adjustment mechanism in mergers and acquisitions

Xiaojie Ye, Dan Yang and Ling Yu

Finance Research Letters, 2025, vol. 82, issue C

Abstract: This study investigates whether venture capitalists’ (VC) monitoring role has spillover effect, using the evidence of their portfolio firms’ adoption of valuation adjustment mechanism (VAM) in mergers and acquisitions (M&As). Based upon firm-level data in the Chinese secondary market, we find that VC-backed firms prefer using VAM and get higher strategic returns. Findings confirm the spillover effect. We further identify VCs as monitors through working in the portfolio firms’ decision-making positions and actively involving in negotiating VAM terms. Meanwhile, VCs act as a substitute for other large shareholders in monitoring the portfolio firms’ M&As; and domestic VCs perform better.

Keywords: Venture capitalists; Valuation adjustment mechanism; Mergers and acquisitions; China (search for similar items in EconPapers)
JEL-codes: G24 G32 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:82:y:2025:i:c:s1544612325008657

DOI: 10.1016/j.frl.2025.107606

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