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The importance of trust for investment: evidence from venture capital

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, t...

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Publication status:
Published
Peer review status:
Peer reviewed
Version:
Accepted Manuscript

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Publisher copy:
10.1093/rfs/hhw023

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Institution:
University of Oxford
Department:
Oxford, SSD, Said Business School
Role:
Author
W. Maurice Young Centre for Entrepreneurship and Venture Capital Research More from this funder
Publisher:
Oxford University Press Publisher's website
Journal:
Review of Financial Studies Journal website
Volume:
29
Issue:
9
Pages:
2283-2318
Publication date:
2016-05-24
DOI:
EISSN:
1465-7368
ISSN:
0893-9454
URN:
uuid:9b206626-115a-441e-8629-4b996d0b718f
Source identifiers:
610194
Local pid:
pubs:610194
Paper number:
9

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