How Does Policy Uncertainty Affect Venture Capital?

Xuan Tian, Yichu Wang and Kailei Ye

The Review of Corporate Finance Studies, 2025, vol. 14, issue 2, 439-481

Abstract: This paper examines the effect of policy uncertainty on venture capital (VC) investment. Relying on plausibly exogenous variation in policy uncertainty caused by closely contested U.S. gubernatorial elections, we find that policy uncertainty negatively affects VC investment. The effect is more pronounced if VC investment is subject to higher illiquidity. However, some distinctive features of VCs (strategic motives, intensive post-investment monitoring, and preferences for early-stage and high-tech ventures) mitigate the effect of policy uncertainty, distinguishing the effect of policy uncertainty on VC investments (in private markets) from that in public markets. Our findings shed new light on the real effects of policy uncertainty in private markets. (JEL G24, D81, M13)

Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
http://hdl.handle.net/10.1093/rcfs/cfad023 (application/pdf)
Access to full text is restricted to subscribers.

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:oup:rcorpf:v:14:y:2025:i:2:p:439-481.

Access Statistics for this article

The Review of Corporate Finance Studies is currently edited by Andrew Ellul

More articles in The Review of Corporate Finance Studies from Society for Financial Studies
Bibliographic data for series maintained by Oxford University Press ().