More than Money: Venture Capitalists on Boards

The Journal of Law, Economics, and Organization (2019)

40 Pages Posted: 30 Mar 2015 Last revised: 13 Jul 2019

See all articles by Natee Amornsiripanitch

Natee Amornsiripanitch

Yale University, School of Management, Students

Paul A. Gompers

Harvard Business School - Finance Unit; Harvard University - Entrepreneurial Management Unit; National Bureau of Economic Research (NBER); European Corporate Governance Institute (ECGI)

Yuhai Xuan

University of California, Irvine - Paul Merage School of Business

Date Written: April 11, 2019

Abstract

We explore patterns of board structure and function in the venture capital industry, identifying factors that influence whether venture capitalists receive a board seat and whether they take action to help portfolio companies in which they invest. In a comprehensive sample of US-based and non-US-based companies, we find that a venture capital firm’s prior relationship with the founder, lead investor status, track record, network size, and geographical proximity to the portfolio company are positively correlated with its likelihood of taking a board seat in an investment round. When venture capital investors serve on the board, portfolio companies tend to recruit managers and board members from these investors’ network and are more likely to exit via relationship-based acquisitions. These patterns are particularly strong for successful and well-connected venture capitalists on the board.

Keywords: Corporate Finance, Corporate Governance, Venture Capital, Private Equity, Econometrics

JEL Classification: G30

Suggested Citation

Amornsiripanitch, Natee and Gompers, Paul A. and Xuan, Yuhai, More than Money: Venture Capitalists on Boards (April 11, 2019). The Journal of Law, Economics, and Organization (2019), Available at SSRN: https://ssrn.com/abstract=2586592 or http://dx.doi.org/10.2139/ssrn.2586592

Natee Amornsiripanitch

Yale University, School of Management, Students ( email )

New Haven, CT
United States

Paul A. Gompers (Contact Author)

Harvard Business School - Finance Unit ( email )

Boston, MA 02163
United States
617-495-6297 (Phone)
617-496-8443 (Fax)

Harvard University - Entrepreneurial Management Unit ( email )

Cambridge, MA 02163
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

European Corporate Governance Institute (ECGI)

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

HOME PAGE: http://www.ecgi.org

Yuhai Xuan

University of California, Irvine - Paul Merage School of Business ( email )

4291 Pereira Drive
Irvine, CA California 92697-3125
United States

HOME PAGE: http://yuhai.merage.uci.edu/

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