Identity, instability, and investors: An empirical investigation of the home bias

Thilo Rene Huning and Fabian Wahl

No 35, Working Papers from German Research Foundation's Priority Programme 1859 "Experience and Expectation. Historical Foundations of Economic Behaviour", Humboldt University Berlin

Abstract: In this paper, we present novel data from the German-speaking area on 13,422 venture capital investments between 1999 and 2019, and document a novel and yet unexplained contributor to investors' home bias. We propose a new measure of regional identity based on a recent vehicle license plate liberalization in Germany, and leverage on a unique dataset of historical borders to show how regional identity is formed. We use an instrumental strategy to establish a causal link between historical political instability, regional identity, and the home bias. Our results indicate that a common regional identity is highly relevant for investment decisions.

Keywords: home bias; venture capital; start-ups; investor behavior; common regional identity; historical political instability (search for similar items in EconPapers)
JEL-codes: G11 G24 G41 N20 Z19 (search for similar items in EconPapers)
Date: 2022
New Economics Papers: this item is included in nep-ure
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Related works:
Working Paper: Identity, Instability, and Investors. An Empirical Investigation of the Home Bias (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:pp1859:35

DOI: 10.18452/25369

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