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Informational Hold-up and Performance Persistence in Venture Capital, Review of Financial Studies


We propose and test a theory of learning and informational hold-up in the venture capital market. The model predicts that higher returns on the current fund increase the probability that a VC will raise a follow-on fund, the size of the follow-on fund, and the performance fee investors are charged in the follow-on fund. If learning is asymmetric, such that incumbent investors learn more about fund manager skill than potential new investors, the model also predicts persistence in returns, poor performance among rst-time funds, persistence in investors from fund to fund, and over-subscription in follow-on funds raised by successful fund managers. Our empirical evidence is consistent with these predictions. The model provides a unified framework for understanding a series of empirical facts about the venture capital industry.


Working Paper


Yael V. Hochberg, Alexander Ljungqvist, Annette Vissing-Jorgensen

Date Published



Hochberg, V. Yael, Alexander Ljungqvist, and Annette Vissing-Jorgensen. 2011. Informational Hold-up and Performance Persistence in Venture Capital. Review of Financial Studies.


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