The Impact of Venture Capital Background on CEO Replacement in Portfolio Companies: Empirical Evidence from China. (22nd December 2021)

• Record Type: Journal Article
• Authors: Hao, Haixia; Guo, Lihong
• Other Names: Gong Daqing Academic Editor.
• Is Part Of: Discrete dynamics in nature and society. Volume 2021(2021)
• Publication Date: 2021-12-22
• Subjects: System analysis -- Periodicals; Dynamics -- Periodicals; Chaotic behavior in systems -- Periodicals; Differentiable dynamical systems -- Periodicals; 003.05
• DOI: 10.1155/2021/4025499
• Languages: English
• ISSNs: 1026-0226

Abstract

Abstract : Taking Chinese startups backed by venture capital (VC) in 1997–2017 as the sample, this study investigates the impact of VC background on chief executive officer (CEO) replacement in portfolio companies. The results show that (1) compared to foreign VC, domestic VC is more likely to replace the CEO of the portfolio companies. (2) Syndicate with domestic VC can overcome the disadvantage of foreign VC geographically distant from the portfolio companies, and domestic VC as coinvestors can effectively monitor portfolio companies, increasing the possibility of CEO replacement. Heterogeneity analysis shows that the positive effect of VC background on CEO replacement exists in the subgroup of VC geographically proximate to the portfolio companies, indicating that geographic proximity to the portfolio companies helps VC more easily grasp the development of the portfolio companies and more likely to replace CEO. This paper reveals the differences in the behavior of VC in replacing CEO during the postinvestment management process, highlights the critical role of geographical proximity, and provides important management insights for VC and entrepreneurs.