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The Impact of Patient Capital

Author

Listed:
  • Yingxiang Li
  • Tong Liu
  • Ting Xu

Abstract

We show that investor patience shapes venture capital (VC) investment strategies and outcomes. A randomized experiment with Chinese fund managers shows that managers tailor fund duration and project holding periods to the perceived horizons of their limited partners (LPs). We then exploit a 2014 reform that opened RMB-denominated VC funds to insurers, comparing treated RMB funds with unaffected USD funds run by the same general partners (GPs). Insurer entry displaced shorter-horizon LPs and shifted funds toward longer holding periods and earlier-stage investments, improving portfolio company outcomes. This pass-through of patience weakens when secondary markets for LP stakes are more liquid.

Suggested Citation

  • Yingxiang Li & Tong Liu & Ting Xu, 2026. "The Impact of Patient Capital," NBER Working Papers 35711, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:35711
    Note: AP CF PR
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    More about this item

    JEL classification:

    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights

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