IDEAS home Printed from https://ideas.repec.org/a/wsi/serxxx/v64y2019i05ns0217590816500405.html
   My bibliography  Save this article

Funding Liquidity Risk, Syndication Behavior And The Risk Culture Of The Australian Venture Capital Industry

Author

Listed:
  • ASIF IQBAL SIDDIQUI

    (Curtin University Sustainability Policy Institute, Building 209 (Lvl 1), Kent St, Bentley WA 6102 Perth, Australia)

  • DORA MARINOVA

    (Curtin University Sustainability Policy Institute, Building 209 (Lvl 1), Kent St, Bentley WA 6102 Perth, Australia)

Abstract

Venture capital (VC) is usually invested in high risk technology companies at their early stages of development. In response to the industry risk environment, the VC fund managers have developed a set of risk management practices appropriate for the industry which include investment syndication. Furthermore, the VC funds are supplied by individual and institutional investors with different risk profiles and investment focus, usually in finite amounts and for a limited period of time. The funding agreement between the VC firms and the fund investors combined with the limited amount and time can lead to additional funding liquidity risks as the VC funds are invested in the portfolio companies. In this paper, we develop a simple two period model from a VC firm’s perspective with funding liquidity constraints to demonstrate how funding liquidity risk can influence syndication decisions. We subsequently analyze the implication of the model, derive a set of predictions and validate them with VC investment data from Australia. The analysis shows that syndication has both instrumental function in risk management and behavioral implications on risk culture essential for addressing the emerging frontiers of sustainability risks.

Suggested Citation

  • Asif Iqbal Siddiqui & Dora Marinova, 2019. "Funding Liquidity Risk, Syndication Behavior And The Risk Culture Of The Australian Venture Capital Industry," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 64(05), pages 1279-1297, December.
    • Handle: RePEc:wsi:serxxx:v:64:y:2019:i:05:n:s0217590816500405
    DOI: 10.1142/S0217590816500405
    as

    Download full text from publisher

    File URL: http://www.worldscientific.com/doi/abs/10.1142/S0217590816500405
    Download Restriction: Access to full text is restricted to subscribers
    File URL: https://libkey.io/10.1142/S0217590816500405?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wsi:serxxx:v:64:y:2019:i:05:n:s0217590816500405. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Tai Tone Lim (email available below). General contact details of provider: http://www.worldscinet.com/ser/ser.shtml .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.