From Banks or Venture Capitals? The Financing Choices of Chinese High-Tech Enterprises During the Start-Up Period

The purpose of this research is financing options for high-tech enterprises in China during their early-stage. This study develops a three-phase model to analyze the financing choices of Chinese high-tech firms between banking and venture capital while considering information asymmetry. The findings reveal that opaque information disclosure favors venture capital financing, while transparent disclosure leads to bank loans for equally qualified high-tech enterprises. Data analysis further confirms that both bank loans and venture capital are viable options for early-stage Chinese high-tech enterprises. These findings offer valuable guidance for high-tech firms and investors navigating China’s financial landscape. Moreover, policy management departments can leverage these insights to make informed decisions and facilitate the financing of high-tech enterprises. JEL Classification: C70, C23, D22, G24.