Buchner, A, Mohamed, A and Schwienbacher, A (2017) Diversification, risk, and returns in venture capital. Journal of Business Venturing, 32 (5). pp. 519-535. ISSN 0883-9026
Abstract
We explore an alternative, finance theory-based explanation for the documented positive relationship between fund diversification (or lack of fund specialization) and performance in venture capital (VC). Our proposed “Risk Hypothesis” posits that the expected negative impact of diversification on fund risk induces fund managers to endogenously select riskier investments, which in turn leads to higher performance of more diversified funds. While other channels may also be at play, we provide results that support this hypothesis for an international sample of VC funds. However, this effect is weakened when expertise is limited. The study offers implications of how VC fund managers' investment decisions are influenced by strategic portfolio considerations, which in turn affect which innovative ventures receive funding.
Metadata
Item Type: | Article |
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Authors/Creators: |
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Copyright, Publisher and Additional Information: | © 2017 Elsevier Inc. This is an author produced version of a paper published in Journal of Business Venturing. Uploaded in accordance with the publisher's self-archiving policy. |
Keywords: | Venture capital; Diversification; Risk; Entrepreneurial finance; Venture finance |
Dates: |
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Institution: | The University of Leeds |
Academic Units: | The University of Leeds > Faculty of Business (Leeds) > Accounting & Finance Division (LUBS) (Leeds) |
Depositing User: | Symplectic Publications |
Date Deposited: | 20 Jun 2019 13:57 |
Last Modified: | 03 Jul 2019 01:12 |
Status: | Published |
Publisher: | Elsevier |
Identification Number: | 10.1016/j.jbusvent.2017.05.005 |
Open Archives Initiative ID (OAI ID): | oai:eprints.whiterose.ac.uk:147568 |