The role of venture capitalists in small and medium-sized enterprise initial public offerings : evidence from China.

Despite the rapid growth and importance of small and medium-sized enterprises and the venture capital (VC) industry in China, this is the first article to examine comprehensively the role of VCs in public firms listed on the Small and Medium Enterprise Board and the Growth Enterprise Board. Supporting monitoring and certification hypotheses, the study finds that VC-backed initial public offerings have higher premiums, lower initial underpricing and higher subsequent market reaction. The grandstanding motive is documented for younger VCs which offer higher levels of initial underpricing to enhance their positions in the industry, but no evidence is found to support grandstanding by foreign VCs