References (45)


Citations (17)



The Causes and Consequences of Venture Capital Stage Financing

Xuan Tian

Indiana University - Kelley School of Business - Department of Finance

June 30, 2010

Journal of Financial Economics (JFE), Forthcoming

This paper examines the causes and consequences of venture capital (VC) stage financing. Using information about the physical location of an entrepreneurial firm and the geographic distance between the VC investor and the firm, I show that VC investors located farther away from an entrepreneurial firm tend to finance the firm using a larger number of financing rounds, shorter durations between successive rounds, and investing a smaller amount in each round. However, VC investors’ propensity to stage is independent of whether the firm is located in a close-knit community. I also find that VC staging positively affects the entrepreneurial firm’s propensity to go public, operating performance in the initial public offering (IPO) year, and post-IPO survival rate, but only if the firm is located far away from the VC investor. However, the effect of VC staging on entrepreneurial firm’s performance is independent of whether it is located in a close-knit community. The findings are robust to a variety of alternative proximity measures, instrumental variables, and econometric approaches for dealing with endogeneity problems.

Number of Pages in PDF File: 56

Keywords: Stage financing, Venture capital, Monitoring, Hold-up, Learning, Distance

JEL Classification: G24, G23

Open PDF in Browser Download This Paper

Date posted: March 17, 2008 ; Last revised: May 14, 2014

Suggested Citation

Tian, Xuan, The Causes and Consequences of Venture Capital Stage Financing (June 30, 2010). Journal of Financial Economics (JFE), Forthcoming. Available at SSRN: http://ssrn.com/abstract=965803 or http://dx.doi.org/10.2139/ssrn.965803

Contact Information

Xuan Tian (Contact Author)
Indiana University - Kelley School of Business - Department of Finance ( email )
1309 E. Tenth Street
Bloomington, IN 47405
United States
812-8553420 (Phone)
824-8555875 (Fax)
HOME PAGE: http://kelley.iu.edu/tianx

Feedback to SSRN

Paper statistics
Abstract Views: 4,962
Downloads: 1,317
Download Rank: 8,717
References:  45
Citations:  17
Paper comments
No comments have been made on this paper

© 2015 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo4 in 0.313 seconds