Venture Capital Investment Duration

41 Pages Posted: 12 Dec 2008 Last revised: 20 Jan 2009

See all articles by Douglas J. Cumming

Douglas J. Cumming

Florida Atlantic University

Sofia Johan

Florida Atlantic University - Finance; Tilburg Law and Economics Center (TILEC)

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Date Written: December 1, 2008

Abstract

This paper examines cross-country evidence on the duration of venture capital (VC) investment. We formulate a theory of VC investment duration based on the idea that venture capitalists exit when the expected marginal cost of maintaining the investment is greater than the expected marginal benefit, and thereby relate VC investment duration to entrepreneurial company characteristics, investor characteristics, deal characteristics, and institutional and market conditions. VC investment duration data in Canada and the US lend strong support to the theoretical predictions developed herein.

Keywords: Venture Capital, Duration, Exits, Initial Public Offerings, Write-offs, Public Policy

JEL Classification: G23, G24, G28, G32, G38, K22

Suggested Citation

Cumming, Douglas J. and Johan, Sofia A., Venture Capital Investment Duration (December 1, 2008). Journal of Small Business Management, Forthcoming. Available at SSRN: https://ssrn.com/abstract=1315042

Douglas J. Cumming (Contact Author)

Florida Atlantic University ( email )

777 Glades Rd
Boca Raton, FL 33431
United States

HOME PAGE: http://booksite.elsevier.com/9780124095373/

Sofia A. Johan

Florida Atlantic University - Finance ( email )

777 Glades Rd
Boca Raton, FL 33431
United States

Tilburg Law and Economics Center (TILEC) ( email )

Warandelaan 2
Tilburg, 5000 LE
Netherlands

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