Moderating Roles of Venture Capital Firms’ Characteristics on the Relationship between Women Entrepreneurs and Financial Performance of Venture-Backed Businesses in Selected Southeast Asia Countries

Siew, Chi Kean (2023) Moderating Roles of Venture Capital Firms’ Characteristics on the Relationship between Women Entrepreneurs and Financial Performance of Venture-Backed Businesses in Selected Southeast Asia Countries. Masters thesis, Tunku Abdul Rahman University of Management and Technology.

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Abstract

Women entrepreneurs have been widely recognised for playing a prominent role in a country’s macroeconomic development. However, not much attention has been given to this group of individuals in terms of the resources they need. To understand the underlying problems, it is important to find out the explanation for the performance difference between genders. Hence, this study aims to examine the relationship between women entrepreneurs and the financial performance of venture-backed businesses in selected Southeast Asia countries. Moreover, this study also investigates four potential moderating variables of venture capital (VC) firms’ characteristics which may influence this relationship, i.e., the amount of invested capital, stages of financing, profit orientation and geographical distance. This research is conducted based on a sample of 656 venture-backed businesses in three selected countries in Southeast Asia, i.e., Malaysia, Singapore and Indonesia for the year 2022, which make this a cross-sectional study. The pooled ordinary least squares method is adopted to conduct the analysis. Based on the results, the study concludes that there is a significantly negative relationship between women entrepreneurs and the financial performance of venture-backed businesses. In terms of the moderating role of the amount of invested capital, this research demonstrates that when VC firms invest in women-led startups, the financial performance of the venture-backed businesses tend to deteriorate. Nevertheless, a further examination on the IV overall effect of women entrepreneurs on the financial performance of the venture-backed businesses among firms with larger amount of invested capital by the VC firms reveals that larger-sized VC capital investment enhances the financial performance of the venture-backed businesses that are led by women entrepreneurs. Besides, this study finds that early-stage VC financing leads to better financial performance of the venture-backed businesses that are led by women entrepreneurs. Interestingly, this research reports no evidence supporting the moderating role of profit orientation of the VC firms on this association. Lastly, the results demonstrate that when the geographical distance between the VC firms and venture-backed businesses is greater, the financial performance of women-led venture-backed firms will decline. The findings of this research have several important implications. First, the results may assist policymakers to formulate appropriate policies or legislations to encourage the participation of women in the leadership roles and to provide the necessary assistance to enable women entrepreneurs to better contribute to the financial performance of their firms. Moreover, policymakers should devise suitable policies to encourage more VC investments in women-led firms, especially early-stage financing. Furthermore, the policymakers should adopt a more business-friendly policy to attract foreign VC firms to set up their offices in their country, hence reducing the geographical distance between the VC firms and the venture-backed businesses. Lastly, the findings may enable VC firms to make informed decisions to provide more capital injections into businesses led by women entrepreneurs, particularly early-stage financing. Besides, VC firms should consider the geographical location of their offices and their distance from the venture-backed firms when formulating their investment decisions.