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In capital markets, top-tier investors may have better abilities to monitor and manage their investments. In addition, there may be sorting in these markets, with top-tier investors investing in the best deals, second-tier investors investing in the second-best deals, and so forth. To separate and quantify these two effects, a structural model of the market(More)
Many financial markets are characterized by strong relationships and networks, rather than arm's-length, spot market transactions. We examine the performance consequences of this organizational structure in the context of relationships established when VCs syndicate portfolio company investments. We find that better-networked VC firms experience(More)
This paper examines the effects of venture capital backing on the corporate governance of the firm following the IPO. I conduct three independent sets of tests examining effectively how governance and monitoring might differ for venture-and non-venture-backed firms. First, I find that venture-backed firms have lower earnings management, as measured by the(More)
This paper argues that a large component of success in entrepreneurship and venture capital can be attributed to skill. We show that entrepreneurs with a track record of success are more likely to succeed than first time entrepreneurs and those who have previously failed. Funding by more experienced venture capital firms enhances the chance of success, but(More)
Institutional investors exhibit substantial home-state bias in private equity. This effect is particularly pronounced for public pension funds, where overweighting amounts to 9.7% of aggregate private-equity investments and 16.2% for the average limited partner. Public pension funds' in-state investments underperform by 2-4 percentage points, achieving(More)
Lifetime incomes of private equity general partners (GPs) are affected by their current funds' performance not only directly, through carried interest profit-sharing provisions, but also indirectly by the effect of the current fund's performance on GPs' abilities to raise capital for future funds. In the context of a rational learning model, which we show(More)
  • Florencio Lopez-de-Silanes, Ludovic Phalippou, +27 authors Jason Zein
  • 2012
We examine the determinants of private equity returns using a newly constructed database of 7,500 investments worldwide over forty years. One in ten investments does not return any money, whereas one in four has an IRR above 50%. Performance does not appear scalable: investments held by private equity firms at times of a high number of other simultaneous(More)
We examine whether options granted to non-executive employees affect the performance of the firm by exploring the link between broad-based option plans, option portfolio implied incentives, and firm operating performance. We employ an instrumental variables approach that combines information about the characteristics of the labor market in which firms(More)