Publication Type
Journal Article
Version
acceptedVersion
Publication Date
9-2014
Abstract
This paper investigates venture capitalists’ monitoring of managerial behaviour by examining their impact on CEO pay-performance sensitivity across various controlling structures in Chinese firms. We find that the effectiveness of venture capitalists' monitoring depends on different types of agency conflict. In particular, we find that venture capital (VC) monitoring is hampered in firms that experience severe controlling-minority agency problems caused by disproportionate ownership structures. We provide further evidence that VC is more likely to exert close monitoring in firms that have greater managerial agency conflict, and thus require more direct monitoring. However, controlling-minority agency problems have a greater impact on VC monitoring than managerial agency problems. Overall, our study suggests that venture capitalists' monitoring role is hampered in an emerging market where firms have complex ownership structures that contribute to severe agency conflict between controlling and minority shareholders.
Keywords
Venture capital, disproportionate ownership, pay-performance relationship, agency problems
Discipline
Asian Studies | Finance and Financial Management
Research Areas
Finance
Publication
Pacific-Basin Finance Journal
Volume
29
First Page
121
Last Page
145
ISSN
0927-538X
Identifier
10.1016/j.pacfin.2014.04.005
Publisher
Elsevier
Citation
CAO, Jerry X.; LIU, Qigui; and TIAN, Gary G..
Do venture capitalists play a monitoring role in an emerging market: Evidence from the pay-performance relationship of Chinese entrepreneurial firms?. (2014). Pacific-Basin Finance Journal. 29, 121-145.
Available at: https://ink.library.smu.edu.sg/lkcsb_research/5229
Copyright Owner and License
Authors
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
Additional URL
https://doi.org/10.1016/j.pacfin.2014.04.005