Exit market liquidity and venture capitalists' investment behaviour: Evidence from Australia, Canada and the United Kingdom

Gangodawila Perera, Tabita Bertsch, Jayasinghe Wickramanayake

    Research output: Contribution to journalArticleResearchpeer-review

    Abstract

    This study investigates the effect of exit market liquidity on venture capitalists (VCs ) investment behaviour. The sample consists of 4,758 investment rounds disbursed by venture capital funds in three selected common law-based OECD countries (Australia, Canada and the United Kingdom) during 1990-2005. The results indicate that investments in early-stage projects by VCs are not related to exit market liquidity conditions after controlling for exogenous factors. Empirical results, however, show that exit market liquidity is positively associated with VCs investments in new projects (as opposed to follow-on projects). Put differently, new firms (including start-ups) are more likely to obtain venture capital funding during times of liquid exit market conditions. Arguably, these findings highlight the importance of timing of new project launch
    Original languageEnglish
    Pages (from-to)743 - 757
    Number of pages15
    JournalCorporate Ownership and Control
    Volume8
    Issue number1
    Publication statusPublished - 2010

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