Asset liquidity and venture capital investment

We examine the relationship between asset market liquidity and venture capital (VC) investment and find that it is inverted U-shaped. Asset liquidity and VC investment are positively related for low levels of asset liquidity but negatively related for higher levels of asset liquidity. We also docume...

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Bibliographic Details
Published in:Journal of corporate finance (Amsterdam, Netherlands) Vol. 69; no. 69; p. 101963
Main Authors: Nguyen, Giang, Vo, Vinh
Format: Journal Article
Language:English
Published: Elsevier B.V 01.08.2021
Elsevier
Subjects:
Asset liquidity
Business administration
Economics and Finance
Experience
Humanities and Social Sciences
Investment
Success
Venture capital
Asset liquidity
Experience
Venture capital
G24
G34
Success
Investment
ISSN:0929-1199, 1872-6313
Online Access:Get full text
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Summary:We examine the relationship between asset market liquidity and venture capital (VC) investment and find that it is inverted U-shaped. Asset liquidity and VC investment are positively related for low levels of asset liquidity but negatively related for higher levels of asset liquidity. We also document evidence that VC firms with more industry experience invest more in a liquid asset market than those without industry experience or with significant experience in other industries. Portfolio companies obtained their first investment in a liquid asset market are less likely to exit successfully; however, given a successful exit, they prefer to exit through mergers and acquisitions rather than going public. •We examine the relationship between asset liquidity and venture capital (VC) investments•We find that the relationship is inverted U-shaped.•VCs with more industry experience invest more in a liquid asset market.•Portfolio companies received their first investment in a liquid asset market are unlikely to exit successfully.•Given a successful exit, portfolio companies prefer M&As rather than going public in a liquid asset market.
ISSN:0929-1199
1872-6313
DOI:10.1016/j.jcorpfin.2021.101963