Venture capital funds: Flow-performance relationship and performance persistence
AbstractThis paper finds that venture capital funds that are expected to be backed by more skilled investors show no performance persistence but a significant flow-performance relationship. In contrast, funds that are expected to be backed by less skilled investors show performance predictability and have a non-significant flow-performance relationship. These results suggest that only skilled investors use all available information to adjust their capital allocation and, as a result, eliminate performance predictability as argued theoretically by Berk and Green (2004). Results also show that Kaplan and Schoar (2005) overstate the persistence in fund performance by not using an ex ante measure of the performance of earlier funds. Whether or not an ex ante measure is used, however, the persistence is largely due to unsophisticated investors. When investors are sophisticated, the performance of earlier funds, sequence and fund size do not help predict the performance of the focal fund.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Elsevier in its journal Journal of Banking & Finance.
Volume (Year): 34 (2010)
Issue (Month): 3 (March)
Contact details of provider:
Web page: http://www.elsevier.com/locate/jbf
Venture capital Performance Performance persistence Investor sophistication;
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Jonathan B. Berk & Richard C. Green, 2002.
"Mutual Fund Flows and Performance in Rational Markets,"
NBER Working Papers
9275, National Bureau of Economic Research, Inc.
- Jonathan B. Berk & Richard C. Green, 2004. "Mutual Fund Flows and Performance in Rational Markets," Journal of Political Economy, University of Chicago Press, vol. 112(6), pages 1269-1295, December.
- Jonathan B. Berk & Richard C. Green, 2002. "Mutual Fund Flows and Performance in Rational Markets," FAME Research Paper Series rp100, International Center for Financial Asset Management and Engineering.
- Krohmer, Philipp & Lauterbach, Rainer & Calanog, Victor, 2009. "The bright and dark side of staging: Investment performance and the varying motivations of private equity firms," Journal of Banking & Finance, Elsevier, vol. 33(9), pages 1597-1609, September.
- Cochrane, John, 2000.
"The Risk and Return of Venture Capital,"
University of California at Los Angeles, Anderson Graduate School of Management
qt7qm9h594, Anderson Graduate School of Management, UCLA.
- Bongaerts, D. & Charlier, E., 2008.
"Private Equity and Regulatory Capital,"
2008-52, Tilburg University, Center for Economic Research.
- Oliver, Gottschalg & Ludovic, Phalippou, 2006.
"The performance of private equity funds,"
Les Cahiers de Recherche
852, HEC Paris.
- Huij, Joop & Verbeek, Marno, 2007. "Cross-sectional learning and short-run persistence in mutual fund performance," Journal of Banking & Finance, Elsevier, vol. 31(3), pages 973-997, March.
- Cumming, Douglas & Johan, Sofia, 2007.
"Regulatory harmonization and the development of private equity markets,"
Journal of Banking & Finance,
Elsevier, vol. 31(10), pages 3218-3250, October.
- Cumming, D. & Johan, S.A., 2006. "Regulatory harmonization and the development of private equity markets," Discussion Paper 2006-001, Tilburg University, Tilburg Law and Economic Center.
- Josh Lerner & Antoinette Schoar & Wan Wongsunwai, 2007.
"Smart Institutions, Foolish Choices: The Limited Partner Performance Puzzle,"
Journal of Finance,
American Finance Association, vol. 62(2), pages 731-764, 04.
- Josh Lerner & Antoinette Schoar & Wan Wong, 2005. "Smart Institutions, Foolish Choices? The Limited Partner Performance Puzzle," NBER Working Papers 11136, National Bureau of Economic Research, Inc.
- Kaplan, Steve & Schoar, Antoinette, 2004.
"Private Equity Performance: Returns, Persistence and Capital Flows,"
4446-03, Massachusetts Institute of Technology (MIT), Sloan School of Management.
- Steven N. Kaplan & Antoinette Schoar, 2005. "Private Equity Performance: Returns, Persistence, and Capital Flows," Journal of Finance, American Finance Association, vol. 60(4), pages 1791-1823, 08.
- Humphery-Jenner, Mark & Suchard, Jo-Ann, 2013. "Foreign VCs and venture success: Evidence from China," Journal of Corporate Finance, Elsevier, vol. 21(C), pages 16-35.
- Groh, Alexander Peter & Gottschalg, Oliver, 2011. "The effect of leverage on the cost of capital of US buyouts," Journal of Banking & Finance, Elsevier, vol. 35(8), pages 2099-2110, August.
- Badrinath, S.G. & Gubellini, S., 2011. "On the characteristics and performance of long-short, market-neutral and bear mutual funds," Journal of Banking & Finance, Elsevier, vol. 35(7), pages 1762-1776, July.
- Achleitner, Ann-Kristin & Engel, Nico & Reiner, Uwe, 2013. "The performance of venture capital investments: Do investors overreact?," Review of Financial Economics, Elsevier, vol. 22(1), pages 20-35.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei).
If references are entirely missing, you can add them using this form.