Made for each other: Perfect matching in venture capital markets

Hui Fu, Jun Yang and Yunbi An

Journal of Banking & Finance, 2019, vol. 100, issue C, 346-358

Abstract: This paper studies bargaining power allocation and stable matching between venture capitalists and entrepreneurs with double-sided moral hazard in venture capital markets. We find that the optimal bargaining power allocation is determined by the output elasticities of effort by the two parties; the higher the output elasticity for one's effort, the greater her bargaining power. We show that efficient and stable matching follows the principle of positive assortative matching, suggesting that strong entrepreneurs/VCs match with strong partners, and weak ones match with weak counterparts. Using a large sample from the Chinese venture capital market, we empirically confirm that entrepreneurs and VCs with similar standing in their peer groups are more likely to match.

Keywords: Venture capital market; Double-sided moral hazard; Bargaining power; Stable matching (search for similar items in EconPapers)
JEL-codes: C78 G24 M13 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0378426618301158
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:100:y:2019:i:c:p:346-358

DOI: 10.1016/j.jbankfin.2018.05.015

Access Statistics for this article

Journal of Banking & Finance is currently edited by Ike Mathur

More articles in Journal of Banking & Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().