The Chinese peer-to-peer (P2P) lending market is expanding quickly but has a relatively poor level of operation. Using panel-structured data from a leading P2P lending portal in China, we investigate the effects of venture capital (VC) investment on the performance of P2P lending platforms. Specifically, we identify a short-term signaling effect and a long-term governance effect of VC investment on platform performance in terms of transaction volume, and numbers of lenders and borrowers. However, we only find a decrease in average interest rates after venture capitalists' (VCs') entry in the long run. Moreover, we verify both the effects of investment from listed VCs, but no signaling effect and a weak governance effect of investment from non-listed VCs. Our analysis provides new insights into how VC investment improves the performance of target firms.

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Motivated by the recent antitrust cases in which Japanese auto parts suppliers colluded to raise supply prices against their long‐term collaborators, the Japanese carmakers, we study the conditions under which an upstream collusion is profitable even after compensating downstream direct purchasers. Oligopoly competition in successive industries is shown to give rise to a vertical externality and a horizontal externality. If a collusive price of intermediate goods better balances the two externalities, the collusion will raise the joint profit of all firms in the two industries and is therefore profitable for the upstream after compensation of downstream firms.

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