Enhancing the efficiency of governmental intervention in the venture capital market: The monitoring effect

Abstract

This study focuses on the estimation of the "monitoring effect, " which is one of the two sources of value creation (in addition to the "screening effect "), through venture capital (VC) investment. To estimate the monitoring effect excluding the screening effect, this study simultaneously uses the matching and difference-in-differences (DiD) techniques, to overcome the weaknesses of each approach. The analysis confirms the significance of the monitoring effect in enhancing various performance variables, such as corporate growth, job creation, and innovation capacity. In particular, the size of this effect is maximized in mid-stage companies and high-tech industries. The results of this study can help policymakers who aim to foster the government-led VC industry by providing them with insights regarding the importance of monitoring and identifying the characteristics of companies that can maximize the monitoring effect. (C) 2022 Published by Elsevier B.V. on behalf of Economic Society of Australia, Queensland.