Venture capitalists' value-enhancing activities under weak protection of law

Hui Li, Xiaohui Wu, Ying Ye and Qi Zeng

Pacific-Basin Finance Journal, 2018, vol. 50, issue C, 26-40

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.

Keywords: Venture capital; Trust; Firm performance (search for similar items in EconPapers)
JEL-codes: G24 K22 L14 M13 O16 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:pacfin:v:50:y:2018:i:c:p:26-40

DOI: 10.1016/j.pacfin.2017.12.006

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