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Entrepreneurial Litigation and Venture Capital Finance

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  • Cumming, Douglas
  • Haslem, Bruce
  • Knill, April

Abstract

This article empirically examines the interaction between entrepreneurial plaintiff firm litigation and venture capital (VC). The data indicate that, relative to nonplaintiffs, firms that litigate prior to (after) obtaining VC i)Â receive financing from less (more) reputable venture capitalists (VCs), ii)Â are subject to greater (similar) oversight by VCs, iii)Â receive less (more) VC funding, iv)Â are more likely to exit through an initial public offering than through an acquisition, and v)Â are less likely to be liquidated when litigation occurs after VC financing. The results are robust to different specifications, methodologies, and endogeneity checks.

Suggested Citation

  • Cumming, Douglas & Haslem, Bruce & Knill, April, 2017. "Entrepreneurial Litigation and Venture Capital Finance," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 52(5), pages 2217-2250, October.
    • Handle: RePEc:cup:jfinqa:v:52:y:2017:i:05:p:2217-2250_00
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    Cited by:

    1. Massimo G. Colombo & Douglas Cumming & Ali Mohammadi & Cristina Rossi-Lamastra & Anu Wadhwa, 2016. "Open business models and venture capital finance," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 25(2), pages 353-370.
    2. Yongqiang Chu & Yijia (Eddie) Zhao, 2021. "The dark side of shareholder litigation: Evidence from corporate takeovers," Financial Management, Financial Management Association International, vol. 50(3), pages 845-873, September.

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