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Firm valuation in venture capital financing rounds: the role of investor bargaining power

Andy Heughebaert UGent and Sophie Manigart UGent (2012) JOURNAL OF BUSINESS FINANCE & ACCOUNTING. 39(3-4). p.500-530
abstract
This study explores the impact of the bargaining power of venture capital (VC) firms on the valuation of their portfolio companies. VC firm types with greater bargaining power vis-a-vis the entrepreneur are expected to negotiate lower valuations compared with VC firm types with less bargaining power. Consistent with this hypothesis, university and government VC firms, which have comparatively greater bargaining power, negotiate lower valuations compared with independent VC firms. The valuations of captive VC firms equal those of independent VC firms. Our findings suggest that valuations in the VC contract reflect the relative bargaining power of the VC investor.
Please use this url to cite or link to this publication:
author
organization
year
type
journalArticle (original)
publication status
published
subject
keyword
PRIVATE EQUITY, SPIN-OUT COMPANIES, CANADIAN EVIDENCE, AGENCY COSTS, PERFORMANCE, SYNDICATION, INVESTMENTS, INFORMATION, SELECTION, MARKET, bargaining power, valuation, venture capital
journal title
JOURNAL OF BUSINESS FINANCE & ACCOUNTING
J. Bus. Finan. Account.
volume
39
issue
3-4
pages
500 - 530
Web of Science type
Article
Web of Science id
000302550000007
JCR category
BUSINESS, FINANCE
JCR impact factor
1.01 (2012)
JCR rank
33/86 (2012)
JCR quartile
2 (2012)
ISSN
0306-686X
DOI
10.1111/j.1468-5957.2012.02284.x
language
English
UGent publication?
yes
classification
A1
copyright statement
I have transferred the copyright for this publication to the publisher
id
2911263
handle
http://hdl.handle.net/1854/LU-2911263
date created
2012-06-19 09:13:40
date last changed
2012-06-21 09:25:30
@article{2911263,
  abstract     = {This study explores the impact of the bargaining power of venture capital (VC) firms on the valuation of their portfolio companies. VC firm types with greater bargaining power vis-a-vis the entrepreneur are expected to negotiate lower valuations compared with VC firm types with less bargaining power. Consistent with this hypothesis, university and government VC firms, which have comparatively greater bargaining power, negotiate lower valuations compared with independent VC firms. The valuations of captive VC firms equal those of independent VC firms. Our findings suggest that valuations in the VC contract reflect the relative bargaining power of the VC investor.},
  author       = {Heughebaert, Andy and Manigart, Sophie},
  issn         = {0306-686X},
  journal      = {JOURNAL OF BUSINESS FINANCE \& ACCOUNTING},
  keyword      = {PRIVATE EQUITY,SPIN-OUT COMPANIES,CANADIAN EVIDENCE,AGENCY COSTS,PERFORMANCE,SYNDICATION,INVESTMENTS,INFORMATION,SELECTION,MARKET,bargaining power,valuation,venture capital},
  language     = {eng},
  number       = {3-4},
  pages        = {500--530},
  title        = {Firm valuation in venture capital financing rounds: the role of investor bargaining power},
  url          = {http://dx.doi.org/10.1111/j.1468-5957.2012.02284.x},
  volume       = {39},
  year         = {2012},
}

Chicago
Heughebaert, Andy, and Sophie Manigart. 2012. “Firm Valuation in Venture Capital Financing Rounds: The Role of Investor Bargaining Power.” Journal of Business Finance & Accounting 39 (3-4): 500–530.
APA
Heughebaert, A., & Manigart, S. (2012). Firm valuation in venture capital financing rounds: the role of investor bargaining power. JOURNAL OF BUSINESS FINANCE & ACCOUNTING, 39(3-4), 500–530.
Vancouver
1.
Heughebaert A, Manigart S. Firm valuation in venture capital financing rounds: the role of investor bargaining power. JOURNAL OF BUSINESS FINANCE & ACCOUNTING. 2012;39(3-4):500–30.
MLA
Heughebaert, Andy, and Sophie Manigart. “Firm Valuation in Venture Capital Financing Rounds: The Role of Investor Bargaining Power.” JOURNAL OF BUSINESS FINANCE & ACCOUNTING 39.3-4 (2012): 500–530. Print.