This paper examines whether the certification effect of VCs extends to firm's potential customers, and whether, by certifying firms' values to potential customers, VCs provide value to firms. Using weekly trading data from P2P lending platforms in China, we find that the amount of loans facilitated and the number of lenders increase significantly by 25.7% and 49.3%, respectively, immediately after announcements that P2P lending platforms obtain VC investment. We find that this certification effect increases with measures of VC reputation and measures of information asymmetry between P2P lending platforms and potential customers. A difference-in-differences analysis provides consistent results, which are robust after controlling for the effects of news, advertising, and funding. We also document that VC-backed platforms are less likely to default than non-VC-backed platforms. This result provides indirect evidence that VC backing has long-term benefits beyond the news and advertising effects.

This paper examines how government intervention affects firms' investment and investment efficiency, focusing on the world's largest economic stimulus package (ESP) during the 2008 global financial crisis period. The RMB four trillion ESP aimed to restore the economy by promoting investment in priority areas. Thus it provided an exogenous shock to firms' investment environment and exacerbated the impact of government intervention on firms' investment and investment efficiency. We use propensity score matching to match government-intervened firms with their controls to reduce the endogeneity issue of government intervention. Our difference-in-differences analysis shows that government-intervened firms invested more than control firms. Further analysis shows that the source of funding for investment was mainly from bank loans rather than internal cash flows. However, the post-investment performance was poor. We find that the investment efficiency of government-intervened firms decreased and government-intervened firms overinvested after the ESP. Our results are robust to alternative model specifications and placebo tests. The findings suggest that government intervention can play a negative role in government-intervened firms.

Using data from a major online peer-to-peer lending platform, we document that, due to time pressure, investors appear to focus on interest rates and only partially account for credit ratings in their decisions. The effect is stronger for mobile-based investors than for PC-based ones. Our evidence suggests that this variation is caused by the difference in information content on the interfaces rather than differences in the devices’ physical attributes per se. Investors improve their decisions by slowing down and paying more attention to credit ratings after experiencing a loan default firsthand, but not after observing others experiencing defaults.