Along with China′s releases of the government venture capital guiding funds (the GVCGF) and the development of the Venture Capital Market, the methods to evaluate the effect of the GVCGFs on the operation of the joint equity investment become a key research target. To address this, we research on the leveraged effect of the guided fund joint venture investment by collecting matching samples from the PE data Database and by employing the PSM (Propensity Score Matching) method. 

The research reveals three significant findings.First, the leverage effect of GVCGFs joint equity investment in the low-reputation VCFs is significantly higher than that in the high-reputation ones, which supports the "Certification Effect Hypothesis". This demonstrates the domestic investors′ confidence in and recognition of the capacity of the venture capital funds of GVCGFs. This also becomes a favorable signal to use the venture capital market to assess the quality of the venture capital funds in a bid to make decisions on the joint equity investment. 

Second, the leverage effect of GVCGFs joint equity investment in the state-backed VCFs is considerably higher than that in the non-state-backed VCFs, which does not support the "Political Connection Hypothesis". This shows that those resources-enriched VCFs work together can magnify the leverage effect to the utmost extent. This also entails that those VCFs which have much more abundant resources are more likely to collaborate with the government in a bid to optimize the benefits from the GVCGFs. 

Third,the leverage effect of GVCGFs joint equity investment in those VCFs from the developing venture capital regions is noticeably higher than the ones from developed venture capital regions, which supports the "Virtuous Cycle Hypothesis". This shows that the GVCGFs has guided the social capital to move into the developing venture capital regions in a joint-equity way. This signals a virtuous cycle in the domestic venture capital market and expresses the real aim of the Chinese government in setting the GVCGFs. 

This paper measures the policy effect of the GVCGFs through the perspective of joint-equity investment. The research not only helps to divide the investment participation category into two types, referring to solo equity participation and joint-equity participation but also contrasts their influence on the leverage effect. This helps to expand the research scope of assessing the policy effect of the GVCGFs participating in the practice of venture capital. Moreover, the research demonstrates that the heterogeneity between venture capital funds and an obvious regulative effect on the measurement of the policy effect of the GVCGFs. Specifically, the better evaluation of the effect of the GVCGFs policy relies on guiding GVCGFs with higher quality to adopt a much effective way of participation to invest. This further helps to maximize the GVCGFs′ policy effect. Meanwhile, in order to attain the maximum policy effect of the government venture capital guiding funds participating in the venture investment, the two powerful government venture capital guiding funds should unite together with the very experienced venture capital funds to take part in the venture capital investment, thus realizing the real leverage effect of the GVCGFs and releasing a good signal to the domestic venture capital market and further promoting the healthy and steady growth of the domestic venture capital market.

 

GVCGFs, joint equity participation, leverage effect, VCF