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Entrepreneurial Litigation and Venture Capital Finance

Published online by Cambridge University Press:  31 October 2017

Douglas Cumming ,
Bruce Haslem  and
April Knill
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Abstract

This article empirically examines the interaction between entrepreneurial plaintiff firm litigation and venture capital (VC). The data indicate that, relative to nonplaintiffs, firms that litigate prior to (after) obtaining VC i) receive financing from less (more) reputable venture capitalists (VCs), ii) are subject to greater (similar) oversight by VCs, iii) receive less (more) VC funding, iv) are more likely to exit through an initial public offering than through an acquisition, and v) are less likely to be liquidated when litigation occurs after VC financing. The results are robust to different specifications, methodologies, and endogeneity checks.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 52 , Issue 5 , October 2017 , pp. 2217 - 2250
Copyright
Copyright © Michael G. Foster School of Business, University of Washington 2017 

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Footnotes

1

We thank an anonymous referee, Jarrad Harford (the editor), the seminar participants at the University of Florida, the 2014 Law and Entrepreneurship Conference, the 2014 French Finance Association Conference, Durham University, EMLyon Business School, Florida State University, George Washington University, Politecnico di Milano, Southern Utah University, Washington State University, and York University, as well as Vladimir Atanasov, Massimo Colombo, Alexander Groh, Sofia Johan, Ali Mohammadi, Ari Pandes, Michael Robinson, Rick Sias, Gordon Smith, and Harry Turtle, for helpful comments and discussions. Cumming thanks the Social Sciences and Humanities Research Council of Canada for financial support.

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