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Chris Yung, Venture Capital and the Market for Talent during Booms and Busts, Review of Finance, Volume 21, Issue 5, August 2017, Pages 1875–1899, https://doi.org/10.1093/rof/rfw038
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Abstract
I develop and test a model in which the characteristics of entrepreneurs and VCs are jointly determined by real investment opportunities. By inducing the entry of inept agents, booms inflate the dispersion in ability on both sides of the market. Consistent with these predictions, venture fund return data show that 1) new entrants in hot markets are associated with high cross-sectional dispersion in abnormal returns, and 2) the worst performing funds in the sample are disproportionately likely to be new entrants in hot markets.
© The Authors 2016. Published by Oxford University Press on behalf of the European Finance Association. All rights reserved. For Permissions, please email: [email protected]
JEL
D82 - Asymmetric and Private Information; Mechanism Design
G14 - Information and Market Efficiency; Event Studies; Insider Trading
G32 - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
G34 - Mergers; Acquisitions; Restructuring; Corporate Governance
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