Does Reputation Limit Opportunistic Behavior in the VC Industry? Evidence from Litigation against VCs

  • Author(s): VLADIMIR ATANASOV, VLADIMIR IVANOV, KATE LITVAK
  • Published: Nov 19, 2012
  • Pages: 2215-2246
  • DOI: 10.1111/j.1540-6261.2012.01785.x

ABSTRACT

We examine the role of reputation in limiting opportunistic behavior by venture capitalists towards four types of counterparties: entrepreneurs, investors, other VCs, and buyers of VC‐backed startups. Using a hand‐collected database of lawsuits, we document that more reputable VCs (i.e., VCs that are older, have more deals and funds under management, and syndicate with larger networks of VCs) are less likely to be litigated. We also find that litigated VCs suffer declines in future business relative to matched peers. These declines are larger for more reputable VCs, and for VCs that are defendants to multiple lawsuits or sued by entrepreneurs.

Jump to menu

Main Navigation

Search the Site / Journal

Search Keywords

Search Tips

Members' Login

Credentials

Members' Options

Site Footer

View Mobile Version