In this paper we analyze investment sensitivity to cash flows in family-controlled businesses (FCBs) before and after the initial VC investment. We argue that highly constrained ones will be more inclined to change the preservation of the socioemotional wealth as the highest order reference point and, hence, accept the entry of external shareholders such as Venture Capital (VC) institutions. We find that financial constraints are significantly higher in first generation VC-backed FCBs than in similar untreated firms. We also find that VC involvement alleviates but does not fully eliminate the investment-cash flow sensitivity in investee first generation FCBs.
Investment-cash flow sensitivity in family-controlled firms and the impact of venture capital funding
CROCE, ANNALISA;
2013-01-01
Abstract
In this paper we analyze investment sensitivity to cash flows in family-controlled businesses (FCBs) before and after the initial VC investment. We argue that highly constrained ones will be more inclined to change the preservation of the socioemotional wealth as the highest order reference point and, hence, accept the entry of external shareholders such as Venture Capital (VC) institutions. We find that financial constraints are significantly higher in first generation VC-backed FCBs than in similar untreated firms. We also find that VC involvement alleviates but does not fully eliminate the investment-cash flow sensitivity in investee first generation FCBs.I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.
