Working papers

Busy Venture Capitalists and Investment Performance    [ SSRN ]  

While existing studies confirm venture capitalists’ monitoring ability, evidence of their screening ability remains scarce. To confirm VCs’ screening role, I exploit 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: startups added to a VC’s portfolio during her IPO engagement period are 9% less likely to go public or become acquired, and they have 19% lower exit multiples. 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 (2021), Copenhagen Business School (2021), U of Lausanne (2019), HKU Business School (2021), IE Business School (2021), Tilburg (2021), U of Amsterdam (2021), U of Geneva (2019), U of Iowa Tippie College of Business (2021), UVA Darden  (2021), VU Amsterdam  (2021)

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 investigate the link between competition in credit markets and non-price loan terms, specifically financial covenants. We exploit regulation in the leveraged loan market as variation in banks' ability to offer covenant-lite loans. As regulated banks demand relatively more covenants, borrowers switch to unregulated lenders, or shadow banks, leading to a decline in aggregate banks' market share. Results are not driven by lower loan supply or changes in other loan terms, and reflect a relation between lax covenants and loan growth in the broader lending market. Our findings encourage regulators to internalize non-price competition between regulated and unregulated sectors. 

Presentations: ABFER 2023 (scheduled), 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 document how information disclosure concerns shape the choice of limited partners by venture capital firms. Late-2002 court rulings forced public pension plans and public university endowments to disclose fund performance information. The most successful, and typically oversubscribed, venture capital firms responded by excluding public institutions from their new funds, replacing them with domestic nonpublic and foreign investors. Public investors reallocated to less successful and younger VC firms, while some of the affected limited partners agreed to limit the scope of disclosure from VC firms. We find no evidence that these changes were driven by the unwillingness to disclose poor technology bubble returns. 

Presentations: 34th Mitsui Finance Symposium: “Venture Capital and Private Equity” (scheduled), SFS Cavalcade North America 2023 (scheduled), MFA 2023, IPC Spring Research Symposium 2023, Commonwealth Finance Workshop 2022, European FA 2022 (Barcelona), PERC Private Equity Research Symposium (Oxford, 2022), Stanford PhD Seminar (2020)

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)