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Venture capital investment cycles: The impact of public markets

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Listed author(s):
  • Gompers, Paul
  • Kovner, Anna
  • Lerner, Josh
  • Scharfstein, David

Abstract

It is well documented that the venture capital industry is highly volatile and that much of this volatility is associated with shifting valuations and activity in public equity markets. This paper examines how changes in public market signals affected venture capital investing between 1975 and 1998. We find that venture capitalists with the most industry experience increase their investments the most when public market signals become more favorable. Their reaction to an increase is greater than the reaction of venture capital organizations with relatively little industry experience and those with considerable experience but in other industries. The increase in investment rates does not affect the success of these transactions adversely to a significant extent. These findings are consistent with the view that venture capitalists rationally respond to attractive investment opportunities signaled by public market shifts.

(This abstract was borrowed from another version of this item.)

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File URL: http://www.sciencedirect.com/science/article/pii/S0304-405X(07)00141-9
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Article provided by Elsevier in its journal Journal of Financial Economics.

Volume (Year): 87 (2008)
Issue (Month): 1 (January)
Pages: 1-23

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Handle: RePEc:eee:jfinec:v:87:y:2008:i:1:p:1-23
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505576

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  • G2 - Financial Economics - - Financial Institutions and Services

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  1. Malcolm Baker & Jeremy C. Stein & Jeffrey Wurgler, 2003. "When Does the Market Matter? Stock Prices and the Investment of Equity-Dependent Firms," The Quarterly Journal of Economics, Oxford University Press, vol. 118(3), pages 969-1005.
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  18. repec:bla:joares:v:31:y:1993:i:2:p:190-215 is not listed on IDEAS
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