How Transparent are Firms About Their Corporate Venture Capital Investments?
53 Pages Posted: 3 Jan 2018 Last revised: 9 Aug 2019
Date Written: August 1, 2019
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
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