Publication Type

Journal Article

Publication Date

5-2015

Abstract

We propose a model of investment, duration, and exit strategies for start-ups backed by venture capital (VC) funds that accounts for the high level of uncertainty, the asymmetry of information between insiders and outsiders, and the discount rate. Our analysis predicts that start-ups backed by corporate VC funds remain for a longer period of time before exiting and receive larger investment amounts than those financed by independent VC funds. Although a longer duration leads to a higher likelihood of an exit through an acquisition, a larger investment increases the probability of an IPO exit. These predictions find strong empirical support.

Discipline

Corporate Finance | Entrepreneurial and Small Business Operations | Strategic Management Policy

Research Areas

Corporate Reporting and Disclosure

Publication

Journal of Economics and Management Strategy

Volume

24

Issue

2

First Page

415

Last Page

455

ISSN

1058-6407

Identifier

10.1111/jems.12097

Publisher

Wiley: 24 months

Creative Commons License

Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License
This work is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License.

Additional URL

http://doi.org/10.1111/jems.12097

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