 The dynamic investment and exit decisions of venture capitalsZhuming Chen, Can Chen, Tao Lin and Xiaoguo Chen The North American Journal of Economics and Finance, 2021, vol. 55, issue C Abstract: This study develops a continuous time model to examine a complete two-stage decision process for venture capitals (VCs), including investment in the private market at Stage 1 and exit through IPO in the public market at Stage 2. Optimal timings, investment terms, and exit decisions are investigated using the real options game theory under two cases: the same required returns in the public and private markets and a higher required return in the private market than in the public market. Our results indicate that the same required returns in the public and private markets generate an optimal investment decision at Stage 1 without relation to the exit decision in Stage 2. However, when the required return in the private market is higher than that in the public market, the exit decision will influence the investment decision. The size of the initial capital, ownership structure, growth rate and risk of industry, required returns in public and private capital markets, extent of lock-up period price pressure, and transaction costs of financing are important factors influencing the equilibrium results. Keywords: VCs; Investment; IPO; Real option (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:ecofin:v:55:y:2021:i:c:s106294082030190x DOI: 10.1016/j.najef.2020.101300 Access Statistics for this article The North American Journal of Economics and Finance is currently edited by Hamid Beladi More articles in The North American Journal of Economics and Finance from Elsevier |
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