EconPapers    
Economics at your fingertips  
 

Editor's Choice The Importance of Trust for Investment: Evidence from Venture Capital

Laura Bottazzi (), Marco Da Rin () and Thomas Hellmann ()

Review of Financial Studies, 2016, vol. 29, issue 9, 2283-2318

Abstract: We examine the effect of trust in venture capital. Our theory predicts a positive relationship of trust with investment, but a negative relationship with success. Using a hand-collected dataset of European venture capital deals, we find that the Eurobarometer measure of trust among nations positively predicts venture capital firms’ investment decisions, but that it has a negative correlation with successful exits. Our theory also predicts that earlier stage investments require higher trust, that syndication is more valuable in low-trust situations, and that higher trust investors use more contingent contracts. The empirical evidence supports these predictions. Received July 17, 2012; accepted March 15, 2016 by Editor Laura Starks.

Date: 2016
References: Add references at CitEc
Citations: View citations in EconPapers (38) Track citations by RSS feed

Downloads: (external link)
http://hdl.handle.net/10.1093/rfs/hhw023 (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:rfinst:v:29:y:2016:i:9:p:2283-2318.

Ordering information: This journal article can be ordered from
http://www4.oup.co.uk/revfin/subinfo/

Access Statistics for this article

Review of Financial Studies is currently edited by Maureen O'Hara

More articles in Review of Financial Studies from Society for Financial Studies Oxford University Press, Journals Department, 2001 Evans Road, Cary, NC 27513 USA.. Contact information at EDIRC.
Bibliographic data for series maintained by Oxford University Press ().

 
Page updated 2020-10-29
Handle: RePEc:oup:rfinst:v:29:y:2016:i:9:p:2283-2318.