Finance is staged in entrepreneurial settings. It has been argued that staging has a drawback: entrepreneurs manipulate short-term appearances to keep funds flowing. In contrast, this paper finds that staging can lead to either more or less manipulation than non-staged finance. Finally, behavior in early rounds induces a kind of “manipulation persistence” so that total manipulation is path-dependent. The model makes predictions regarding crowdsourced finance, switching of VCs, and lifecycle issues in entrepreneurial finance.

During an IPO offering, issuers may revise both the offer price and quantity (number of shares). These revisions are of comparable magnitude and are nearly uncorrelated. We show theoretically that these two revisions should be interpreted differently. Shocks to growth options induce price and quantity to move together, whereas shocks to assets-in-place induce movements in opposing directions. Using public shocks that proxy for these two shocks, we find evidence of the predicted comovements. Post-IPO investment behavior is predicted by these revisions in a manner consistent with our model. Unexpected investment is positively associated with both price and quantity revisions, but only when the revisions are aligned. Viewed jointly, price and quantity revisions disentangle the nature of information received during the offering.