China’s venture capital (VC) market features significant government ownership of VCs. We examine the impact of government-owned VCs on the exit success of entrepreneurial firms. We distinguish between types of government VC according to the degree of government ownership (whole versus partial) and the level of government (central versus provincial). We find that partially government-owned VCs increase the likelihood of a successful exit, especially via initial public offering (IPO) in mainland China, where the IPO process is discretionary and heavily regulated. Entrepreneurial firms backed by partially government-owned VCs also have a higher likelihood of exit at times of policy uncertainty and the timing of exit is less sensitive to prevailing market conditions. Provincial government-owned VCs increase exit likelihood; however, the positive effect decreases when multiple provincial government-owned VCs invest in a firm. Our findings suggest that entrepreneurial firms may benefit from government VC investment, but that complete government control of a VC can lead to inefficiencies.

Chinese anti-corruption campaigns executed by CCDI (Central Commission for Discipline Inspection) put politicians under high scrutiny. We employ CCDI's inspections as the event and use counterfactual analysis to show that corporations in inspected provinces significantly suppress negative information release evidenced by stock prices following Chen et al. (2001). The variation of political maneuvers to suppress negative information release is consistent with local politician's influences and incentives in affiliated firms, e.g., SOEs or politically connected non-SOEs. SOEs continue to suppress negative information release while non-SOEs experience mean-reversion after inspections. Good governance and auditor's quality partially mitigate manager's incentives to suppress bad news.

The bond market is an important source of financing for Private Equity (PE) sponsored transactions. Using the methodology suggested by Bessembinder et al. (2009), we find that PE-sponsored bonds underperform comparable benchmarks. This is especially true for bonds with credit ratings below investment grade and those issued in hot bond markets. Furthermore, bonds sponsored by more experienced PE groups (PEGs) underperform bonds associated with less experienced PE groups, while bonds backed by investment bank-affiliated PEGs underperform bonds sponsored by other PEGs. These findings highlight the risk and return relationship in the high-yield bond market related to leveraged buyouts (LBOs) and PEGs.

Previous theoretical and empirical studies suggest that CEOs' political connections are valuable to firms. We examine whether such connections become entrenched if the expected political capital fails to materialize and the firm lacks other types of political power. Using a sample of listed non-SOEs in China, we show that politically connected CEOs have a lower probability of turnover and cause a weaker turnover-performance sensitivity than non-politically connected CEOs. Further analyses show that these turnover patterns are not consistent with alternative explanations, such as superior managerial ability, being a member of controlling families or being promoted from the inside. The turnover patterns are less pronounced in firms with alternative political power, such as connected boards or being vital to the local economy. Following the turnover of politically connected CEOs, firm performance does not necessarily undergo significant improvement. Our results call for new theories that comprehend the real effects of political connections.