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Polishing diamonds in the rough: The sources of syndicated venture performance

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  • Das, Sanjiv R.
  • Jo, Hoje
  • Kim, Yongtae

Abstract

Using an effort-sharing framework for VC syndicates, we assess how syndication impacts investment returns, chances of successful exit, and the time taken to exit. With data from 1980 to 2003, and applying apposite econometrics for endogeneity to these different performance measures, we are able to ascribe much of the better return to selection, with the value-addition by monitoring role significantly impacting the likelihood and time of exit. While the extant literature on Venture Capital (VC) syndication is divided about the relative importance of the "selection" and "value-add" hypotheses, we find that their roles are complementary.

Suggested Citation

  • Das, Sanjiv R. & Jo, Hoje & Kim, Yongtae, 2011. "Polishing diamonds in the rough: The sources of syndicated venture performance," Journal of Financial Intermediation, Elsevier, vol. 20(2), pages 199-230, April.
    • Handle: RePEc:eee:jfinin:v:20:y:2011:i:2:p:199-230
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    Cited by:

    1. Dimitris Christopoulos & Stefan Koeppl & Monika Köppl-Turyna, 2022. "Syndication networks and company survival: evidence from European venture capital deals," Venture Capital, Taylor & Francis Journals, vol. 24(2), pages 105-135, April.
    2. Tereza Tykvová, 2018. "Venture capital and private equity financing: an overview of recent literature and an agenda for future research," Journal of Business Economics, Springer, vol. 88(3), pages 325-362, May.
    3. Maia Gejadze & Pierre Giot & Armin Schwienbacher, 2023. "On venture capital exit dynamics," Economics Bulletin, AccessEcon, vol. 43(1), pages 664-678.
    4. Tykvová, Tereza, 2018. "Legal framework quality and success of (different types of) venture capital investments," Journal of Banking & Finance, Elsevier, vol. 87(C), pages 333-350.
    5. Rin, Marco Da & Hellmann, Thomas & Puri, Manju, 2013. "A Survey of Venture Capital Research," Handbook of the Economics of Finance, in: G.M. Constantinides & M. Harris & R. M. Stulz (ed.), Handbook of the Economics of Finance, volume 2, chapter 0, pages 573-648, Elsevier.
    6. Massimo G. Colombo & Douglas Cumming & Ali Mohammadi & Cristina Rossi-Lamastra & Anu Wadhwa, 2016. "Open business models and venture capital finance," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 25(2), pages 353-370.
    7. Kang, Jun-Koo & Li, Yingxiang & Oh, Seungjoon, 2022. "Venture Capital Coordination in Syndicates, Corporate Monitoring, and Firm Performance," Journal of Financial Intermediation, Elsevier, vol. 50(C).
    8. Nguyen, Giang & Vu, Le, 2021. "Does venture capital syndication affect mergers and acquisitions?," Journal of Corporate Finance, Elsevier, vol. 67(C).
    9. Wang, Qing (Sophie) & Lai, Shaojie & Anderson, Hamish D., 2021. "VC fund preferences and exits of individual investors," Pacific-Basin Finance Journal, Elsevier, vol. 67(C).
    10. Humphery-Jenner, Mark & Suchard, Jo-Ann, 2013. "Foreign VCs and venture success: Evidence from China," Journal of Corporate Finance, Elsevier, vol. 21(C), pages 16-35.
    11. Amit Bubna & Sanjiv R. Das & Paul Hanouna, 2020. "The Fast and the Curious: VC Drift," Journal of Financial Services Research, Springer;Western Finance Association, vol. 57(1), pages 69-113, February.
    12. Zhiyi Qiu & Bingyi Liu & Ye Yang, 2023. "Like Performance, Perfect Match: Role of Past Performance in Venture Capital Syndication," SAGE Open, , vol. 13(4), pages 21582440231, December.
    13. Jia, Ning & Wang, Dan, 2017. "Skin in the game: General partner capital commitment, investment behavior and venture capital fund performance," Journal of Corporate Finance, Elsevier, vol. 47(C), pages 110-130.
    14. Dai, Na & Jo, Hoje & Kassicieh, Sul, 2012. "Cross-border venture capital investments in Asia: Selection and exit performance," Journal of Business Venturing, Elsevier, vol. 27(6), pages 666-684.
    15. Mingyi Hung & Yongtae Kim & Siqi Li, 2018. "Political connections and voluntary disclosure: Evidence from around the world," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 49(3), pages 272-302, April.

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