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.