Venture capital (VC) has been playing an increasingly important role in the growth of early-stage companies around the globe. In addition to providing equity financing, venture capitalists also involve heavily in the management of investee companies and provide a number of value-added services. However, Gompers (1996) notes that VCs have strong incentives to grandstand by taking investee firms public prematurely in order to exit and realize investment returns early. Hence, the net impact of VC involvement on firm performance remains unclear. Using a sample of companies listed on the Shenzhen small and medium-sized enterprises (SMEs) board between 2004 and 2012, this paper examines the impact of VC on the short-term and long-term firm performance in emerging markets, particularly China. Empirical results show that compared with non-VC backed firms, VC backed firms are generally younger and smaller at the time of their initial public offering (IPO), as well as exhibit greater IPO underpricing. Moreover, although VC and non-VC backed firms do not exhibit differential performance during the lockup period, the former experience significantly greater decline in accounting performance as well as poorer stock return after the expiration of the lockup period. Additional analyses show that the level of underpricing and decline in firm performance are negatively associated with the age of VC firms. These results provide empirical evidence in accordance with Gompers (1996) grandstanding hypothesis, suggesting that VC firms in China have strong incentives to take firms public prematurely in order to exit and realize investment returns early. This strategic behavior in turn has a negative impact on the long-term performance and well-being of investee companies. We further partition the subsample of VC-backed firms into those backed by stateowned VC firms and those backed by non- stateowned VC firms. Empirical evidence shows that companies invested by non-stateowned VC firms tend to underperform those backed by stateowned VC firms, suggesting that stateowned VC firms have less incentive to grandstand.