Abstract: Taking the IPO companies in SME from 2008 to 2014 and GEM from 2009 to 2014 as the samples, this paper follows the classic VC management hypothesis to examine the impact of venture capital governance on the performance of IPO companies and the regulatory role of internal controls. The results indicate that there exist widely the phenomenon of IPO’s performance worsening in the companies with the participation of venture capital, the higher the degree of participation, the more serious the performance worsening. Further studies show that high quality internal control can weaken the negative impact of VC on the performance of IPO, the higher the degree of VC participation (higher proportion of VC share holding, participation in the governance of the board), the more obvious the role will be. The findings suggest that the development of China’s VC system has not become mature yet; the behavior of VC presents obvious grandstanding motivation. Thus, the regulatory departments should further improve the risk investment system and strengthen the construction of the internal control system of listed companies, so as to achieve the goal of certification supervision over venture investment and creation of value increment.

Key words: venture capital; certification supervision hypothesis; Grandstanding motivation hypothesis; internal control; IPO performance worsening