Faculty Digital Archive

Archive@NYU >
Stern School of Business >
Finance Working Papers >

Please use this identifier to cite or link to this item: http://hdl.handle.net/2451/27869

Title: Informational Hold-up and Performance Persistence in Venture Capital
Authors: Ljungqvist, Alexander
Hochberg, Yael
Vissing-Jorgensen, Annette
Issue Date: 6-Feb-2009
Series/Report no.: FIN-08-023
Abstract: We propose and test a theory of learning and informational hold-up in the venture capital market. The model predicts that higher returns on the current fund increase the probability that a VC will raise a follow-on fund, the size of the follow-on fund, and the performance fee investors are charged in the follow-on fund. If learning is asymmetric, such that incumbent investors learn more about fund manager skill than potential new investors, the model also predicts persistence in returns, poor performance among first-time funds, persistence in investors from fund to fund, and over-subscription in follow-on funds raised by successful fund managers. Our empirical evidence is consistent with these predictions. The model provides a unified framework for understanding a series of empirical facts about the venture capital industry.
URI: http://hdl.handle.net/2451/27869
Appears in Collections:Finance Working Papers

Files in This Item:

File Description SizeFormat
wpa08023.pdf1.01 MBAdobe PDFView/Open

Items in Faculty Digital Archive are protected by copyright, with all rights reserved, unless otherwise indicated.


The contents of the FDA may be subject to copyright, be offered under a Creative Commons license, or be in the public domain.
Please check items for rights statements. For information about NYU’s copyright policy, see http://www.nyu.edu/footer/copyright-and-fair-use.html 
Valid XHTML 1.0 | CSS