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Informational Holdup by Venture Capital Syndicates
Resource type
Authors/contributors
- Hong, Suting (Author)
- Mella-Barral, Pierre (Author)
Title
Informational Holdup by Venture Capital Syndicates
Abstract
We argue that syndicates associate venture capitalists (VCs) with uneven skill levels in order to lower their expected gains from threatening to stop financing: Non-continued participation would send a milder negative signal to alternative financiers. This can explain the empirical observations that i) early-round syndicates regularly associate VCs with different levels of experience and ii) follow-on syndicates often involve none of the early-round VCs. Consistent with the theory, we find empirically that the heterogeneity of VC experience levels in a syndicate is i) negatively related to the extent to which the founders of the VC-backed firm are professionally well connected and ii) positively related to the likelihood of syndicate switching in a later round.
Publication
Journal of Financial and Quantitative Analysis
Volume
59
Issue
3
Pages
1362-1400
Date
2024/05
Language
en
ISSN
0022-1090, 1756-6916
Accessed
6/17/24, 9:36 AM
Library Catalog
Cambridge University Press
Citation
Hong, S., & Mella-Barral, P. (2024). Informational Holdup by Venture Capital Syndicates. Journal of Financial and Quantitative Analysis, 59, 1362–1400.
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