Abstract

http://ssrn.com/abstract=997934
 
 

References (73)



 
 

Citations (20)



 


 



The Importance of Trust for Investment: Evidence from Venture Capital


Laura Bottazzi


University of Bologna - Department of Economics; Bocconi University - IGIER - Innocenzo Gasparini Institute for Economic Research; University of Bologna - Rimini Center for Economic Analysis (RCEA)

Marco Da Rin


Tilburg University, Department of Finance; Tilburg Law and Economics Center (TILEC); European Corporate Governance Institute (ECGI)

Thomas F. Hellmann


Saïd Business School, University of Oxford ; University of British Columbia (UBC) - Sauder School of Business; University of Oxford - Said Business School

March 5, 2016

Forthcoming, Review of Financial Studies

Abstract:     
We examine the effect of trust in venture capital. Our theory predicts a positive relationship of trust with investment, but a negative relationship with success. Using a hand-collected dataset of European venture capital deals, we find that the Eurobarometer measure of trust among nations positively predicts venture capital firms’ investment decisions, but that it has a negative correlation with successful exits. Our theory also predicts that earlier stage investments require higher trust, that syndication is more valuable in low trust situations, and that higher trust investors use more contingent contracts. The empirical evidence supports these predictions.

Number of Pages in PDF File: 38

Keywords: Social Capital, Trust, Financial Contracts, Venture Capital, Corporate Governance

JEL Classification: G24, G34, K22, L14, M13, O16


Open PDF in Browser Download This Paper

Date posted: July 3, 2007 ; Last revised: April 6, 2016

Suggested Citation

Bottazzi, Laura and Da Rin, Marco and Hellmann, Thomas F., The Importance of Trust for Investment: Evidence from Venture Capital (March 5, 2016). Forthcoming, Review of Financial Studies. Available at SSRN: http://ssrn.com/abstract=997934

Contact Information

Laura Bottazzi
University of Bologna - Department of Economics
Strada Maggiore 45
Bologna, 40125
Italy
Bocconi University - IGIER - Innocenzo Gasparini Institute for Economic Research ( email )
Via Roentgen 1
Milan, 20136
Italy
+39 02 5836 3326 (Phone)
+39 02 5836 3302 (Fax)
HOME PAGE: http://www.igier.uni-bocconi.it/bottazzi
University of Bologna - Rimini Center for Economic Analysis (RCEA) ( email )
Via Patara, 3
Rimini (RN), RN 47900
Italy
Marco Da Rin (Contact Author)
Tilburg University, Department of Finance ( email )
P.O. Box 90153
Tilburg, 5000 LE
Netherlands
Tilburg Law and Economics Center (TILEC)
Warandelaan 2
Tilburg, 5000 LE
Netherlands
European Corporate Governance Institute (ECGI)
c/o ECARES ULB CP 114
B-1050 Brussels
Belgium
Thomas F. Hellmann
Saïd Business School, University of Oxford ( email ) ( email )
Park End Street
Oxford, OX1 1HP
Great Britain
+44 (0)1865 288937 (Phone)
HOME PAGE: http://www.sbs.ox.ac.uk/community/people/thomas-hellmann

University of British Columbia (UBC) - Sauder School of Business ( email )
2053 Main Mall
Vancouver, BC V6T 1Z2
Canada
604-822-8476 (Phone)
604-822-8477 (Fax)
HOME PAGE: http://strategy.sauder.ubc.ca/hellmann
University of Oxford - Said Business School ( email ) ( email )
Park End Street
Oxford, OX1 1HP
Great Britain
+44 (0)1865 288937 (Phone)
HOME PAGE: http://www.sbs.ox.ac.uk/community/people/thomas-hellmann

Feedback to SSRN


Paper statistics
Abstract Views: 5,743
Downloads: 687
Download Rank: 25,490
References:  73
Citations:  20
Paper comments
No comments have been made on this paper

© 2016 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollobot1 in 0.297 seconds