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Do venture capital firms benefit from a presence on boards of directors of mature public companies?

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  • Hasan, Iftekhar
  • Khurshed, Arif
  • Mohamed, Abdulkadir
  • Wang, Fan

Abstract

This paper examines the benefits to venture capital firms of their officers holding directorships in mature public companies in terms of fundraising and investment performance. Our empirical results show that venture capital firms raise more funds, set higher fund-raising targets, and are more likely to successfully exit their investments post-appointment of their officers to boards of directors of S&P 1500 companies. Directorship status in mature public firms provides venture capital firms with enhanced networks, visibility, and credibility, all of which facilitate their fundraising activities. In addition, the knowledge, expertise, and experience acquired through holding directorships in mature public firms are beneficial for their portfolio companies, as measured by the likelihood of successful exits.

Suggested Citation

  • Hasan, Iftekhar & Khurshed, Arif & Mohamed, Abdulkadir & Wang, Fan, 2018. "Do venture capital firms benefit from a presence on boards of directors of mature public companies?," Journal of Corporate Finance, Elsevier, vol. 49(C), pages 125-140.
    • Handle: RePEc:eee:corfin:v:49:y:2018:i:c:p:125-140
    DOI: 10.1016/j.jcorpfin.2017.04.018
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    References listed on IDEAS

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    Cited by:

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    2. Lee, Yun-Chi, 2020. "Does staying private longer affect innovation of VC-backed IPOs and outcomes of VC investments?," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 66(C).

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    More about this item

    Keywords

    Venture capital; Board; Directorships; Public companies; Exits;
    All these keywords.

    JEL classification:

    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • G3 - Financial Economics - - Corporate Finance and Governance

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