Working papers

Busy Venture Capitalists and Investment Performance    [ SSRN ]  

Revise and resubmit, Journal of Financial and Quantitative Analysis

While existing studies confirm venture capitalists’ (VCs) monitoring ability, evidence of their screening ability remains inconclusive. To confirm VCs’ screening role, I build on within-individual variation in VC partners’ workload and attention stemming from engagement in their portfolio companies’ IPOs. I find that when VCs are busy and distracted, they tend to make underperforming investments. The effects are stronger in cases of higher workload intensity and higher information asymmetry. These results speak to the importance of screening for generating venture capital returns, and point to the meaningful economic tradeoff between engaging with existing companies and screening of new startups. 

Presentations:   SFS Cavalcade North America 2020,  PERC Private Equity Research Symposium (Oxford, 2019), Annual Private Capital Research Conference (Montreux, 2019), KWC Conference on Entrepreneurial Finance (Lund, 2019), FMA (2019), BI Oslo, Copenhagen Business School, U of Lausanne, HKU Business School, IE Business School, Tilburg, U of Amsterdam, U of Geneva, U of Iowa Tippie College of Business, UVA Darden, VU Amsterdam 

Media coverage: Institutional Investor, Canadian Investment Review

Do Banks Compete on Non-Price Terms? Evidence from Loan Covenants    [ SSRN ]  with Christoph Herpfer and Roberto Steri

We study the interplay between non-price loan terms and competition in credit markets. We exploit a regulatory shock to regulated banks' ability to offer favorable non-price terms, particularly covenant-lite loans. We find that borrowers trade-off increased covenants and lower interest rates from regulated banks, with covenant-lite loans and higher rates from non-banks. This non-price competition alters market structure: less covenant-sensitive borrowers remain with regulated lenders, and financially weaker borrowers switch to shadow banks or leave the leveraged lending market. As a result, banks' market share declines. Our findings on borrower behavior and loan terms align with a stylized equilibrium model. 

Presentations: ABFER 2023*, Regulating Financial Markets Conference* (Frankfurt am Main, 2022), SFS Cavalcade North America 2022*,  AFA 2021 (Chicago)*,  EFA 2020 (Helsinki), MFA 2020 (Chicago)*, 8th Empirical Financial Intermediation (EFI) Workshop (2019)*,  Federal Reserve Bank of Atlanta (2018)*,  Central Bank of Ireland (2018),  Emory (2018)*, GeorgiaTech (2018)*,  U of Lausanne (2018) 

* co-author

The Value of Privacy and the Choice of Limited Partners by Venture Capitalists [ SSRN ] with Will Gornall and Ilya Strebulaev

We study how information disclosure concerns shape the choice of institutional limited partners by venture capital firms. Late-2002 court rulings created exogenous variation in public investors' ability to provide confidentiality to the private equity partnerships in which they invested. The best-performing venture capital firms responded by excluding the public institutions from their new funds and replacing them with domestic private investors. To preserve and regain relationships, many public institutions agreed to receive limited information: laws that forced disclosure by principals led to contracts where agents hid information from their principals.

Presentations: 34th Mitsui Finance Symposium (2023), SFS Cavalcade North America 2023, MFA 2023, IPC Spring Research Symposium 2023, Commonwealth Finance Workshop 2022, European FA 2022 (Barcelona), PERC Private Equity Research Symposium (Oxford, 2022), Esade Business School*, Stanford PhD Seminar

* co-author

Media coverage: The FinReg Blog

Work in progress

The Economics of Venture Capital Funds with Will Gornall and Ilya Strebulaev

Discussions

Competition for Talent: The Impact of Venture Capital Flows on Incumbent Firms by Linghang Zeng (Babson College)

Board Dynamics over the Startup Life Cycle by Michael Ewens (Caltech) and Nadya Malenko (Michigan Ross)

Corporate Venture Capital and Firm Scope by Yifei Zhang (Toulouse School of Economics)

Race, Discrimination, and Hedge Funds by Yan Lu (U of Central Florida), Narayan Naik (LBS), and Melvyn Teo (SMU Singapore)

Size, returns and value added: Do private equity firms allocate capital according to manager skill? by Reiner Braun (TUM), Nils Dorau (TUM), Tim Jenkinson (U of Oxford), and Daniel Urban (Erasmus) 

Funding Black High-Growth Startups by Lisa Cook (Board), Matt Marx (Cornell), Emmanuel Yimfor (U of Michigan)

Initial Public Offerings and Product Market Dynamics: New Perspectives from the Nielsen Retail Scanner Data by Xi Chen (U of Houston), Jingxuan Zhang (Boston College)