Financial contracting with strategic investors: Evidence from corporate venture capital backed IPOs

B-Tier
Journal: Journal of Financial Intermediation
Year: 2009
Volume: 18
Issue: 4
Pages: 599-631

Authors (2)

Masulis, Ronald W. (UNSW Sydney) Nahata, Rajarishi (not in RePEc)

Score contribution per author:

1.005 = (α=2.01 / 2 authors) × 1.0x B-tier

α: calibrated so average coauthorship-adjusted count equals average raw count

Abstract

We analyze financial contracting in start-ups backed by corporate venture capitalists (CVCs). CVCs' strategic goals can economically hurt or benefit the start-ups, depending on product market relationships between start-ups and CVC parents. Empirically, start-ups receive funding from both complementary and competitive CVC parents. However, start-up insiders commonly limit the influence of competitive CVCs, awarding them lower board power, while retaining higher board representation for themselves. Second, lead CVCs receive lower board representation, indicating heightened concerns about their greater influence in start-ups' early stages. Finally, start-ups extract higher valuations from competitive CVCs, reflecting greater moral hazard problems. Overall, CVC strategic objectives affect their early inclusion in VC syndicates, their control rights and share pricing.

Technical Details

RePEc Handle
repec:eee:jfinin:v:18:y:2009:i:4:p:599-631
Journal Field
Finance
Author Count
2
Added to Database
2026-01-25