How Transparent are Firms About Their Corporate Venture Capital Investments?

53 Pages Posted: 3 Jan 2018 Last revised: 9 Aug 2019

See all articles by Sophia Hamm

Sophia Hamm

Tulane University - A.B. Freeman School of Business

Michael J. Jung

University of Delaware - Accounting & MIS

Min Park

University of Kansas - Accounting and Information Systems Area

Date Written: August 1, 2019

Abstract

We examine firms’ corporate venture capital (CVC) investing activities from a voluntary disclosure and financial reporting perspective. CVC refers to minority equity investments made by established, publicly-traded firms in privately-held entrepreneurial ventures. The CVC industry has matured in terms of size, reach, and strategic intent, becoming a driving force for innovation in today’s corporate landscape, yet there is little research about this setting. We document that for half of the firm-years in our sample, there is little to no disclosure of the CVC investees and invested amounts. We find evidence that the lack of transparency is consistent with concerns about revealing investments in new, outside industries where firms may become more active in acquisitions. Firms with a CVC program tend to make more future acquisitions, report an increased number of product segments, experience higher revenue from acquisitions, but they do not tend to recognize more future goodwill impairments. Our findings shed light on a rapidly growing yet veiled allocation of capital.

Keywords: Corporate venture capital, voluntary disclosure, acquisitions, financial reporting

JEL Classification: M41, G11, G24, G32, G34

Suggested Citation

Hamm, Sophia and Jung, Michael J. and Park, Min, How Transparent are Firms About Their Corporate Venture Capital Investments? (August 1, 2019). Available at SSRN: https://ssrn.com/abstract=3090797 or http://dx.doi.org/10.2139/ssrn.3090797

Sophia Hamm

Tulane University - A.B. Freeman School of Business ( email )

7 McAlister Drive
New Orleans, LA 70118
United States

Michael J. Jung (Contact Author)

University of Delaware - Accounting & MIS ( email )

Alfred Lerner College of Business and Economics
Newark, DE 19716
United States

Min Park

University of Kansas - Accounting and Information Systems Area ( email )

1654 Naismith Drive
Lawrence, KS 66045
United States

Register to save articles to
your library

Register

Paper statistics

Downloads
286
Abstract Views
1,542
rank
105,947
PlumX Metrics