Managing Performance Signals Through Delay: Evidence from Venture Capital

Management Science, Forthcoming

53 Pages Posted: 11 Sep 2014 Last revised: 21 Nov 2018

See all articles by Indraneel Chakraborty

Indraneel Chakraborty

University of Miami

Michael Ewens

Columbia Business School; National Bureau of Economic Research (NBER)

Date Written: September 13, 2016


This paper examines whether agency conflicts during venture capital (VC) fundraising impact investment behavior. Using novel investment-level decisions of VCs in the process of raising new funds, we find that venture capitalists take actions hidden from their investors, i.e. limited partners (LPs), that delay revealing negative information about VC fund performance until after a new fund is raised. After fundraising is complete, write-offs double and reinvestments in relatively worse off entrepreneurial firms increase. We find that these observations cannot be explained by strategic bundling of news or effort constraints due to the newly raised fund. Funds with both long and short fundraising track record exhibit this behavior and the delay is costly for fund investors (LPs). This strategic delay shows that fundraising incentives have real impacts on VC fund investment decisions, which are often difficult for LPs to observe.

Keywords: venture capital, reputation, financial intermediation, entrepreneurship

JEL Classification: G24, G14

Suggested Citation

Chakraborty, Indraneel and Ewens, Michael, Managing Performance Signals Through Delay: Evidence from Venture Capital (September 13, 2016). Management Science, Forthcoming, Available at SSRN: or

Indraneel Chakraborty (Contact Author)

University of Miami ( email )

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Coral Gables, FL 33124-6552
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Michael Ewens

Columbia Business School ( email )

665 W. 130th Street
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New York, NY 10027
United States


National Bureau of Economic Research (NBER) ( email )

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