In the current world financial markets, venture capital (VC) has become an important channel for financing of start-ups, the data show that from 2015 to 2016, 229 companies in the United States have acquired VC of billions of dollars, which played a very important role in the development of these enterprises (Gill and Walz, 2016). However, for a long time, there are different views form the academic community on the effects of venture capital on financing of enterprises, some scholars believe that the existence of VC has a positive impact on corporate finance, therefore, they have proposed theories such as certification effect, supervision and screening effect and effect of market power (Bradley, Kim and Krigman, 2015; Sahaym et al., 2016). Some scholars believe that the presence of VC also has a negative impact on corporate finance, therefore, they have put forward theories of adverse selection, grandstanding hypothesis effect. In this study, it aims to take Chinese stock market as the research object to discuss that in the immature Chinese financial market, what is the impact of VC on corporate IPO, by empirical findings to confirm and support that which theory mentioned above can better explain the effect of VC in enterprises.
2.0 Literature Review文献综述
2.1 Contracting theory
2.1.1 Principal-agent theory
Principal-agent theory mainly analyzes that in accordance with contracts, one or more behavior subjects designate, hire some other behavior subjects to serve them, while the latter are granted with certain decision-making rights and paid with appropriate compensation. Baron (1982) and Sahlman (19900 hold that it should design a set of incentive and restraint mechanisms towards agents to maximize reducing the transaction costs due to the adverse selection and moral hazard, so that the smooth operation of VC projects can be guaranteed.
2.1.2 Incomplete contracting theory
2.2 Effects of VC in IPO process
2.2.1 Positive effects
2.2.2 Negative effects