We examine the effect of trust in venture capital. Our theory predicts a positive relationship of trust with investment, but a negative relationship with success. Using a hand-collected dataset of European venture capital deals, we find that the Eurobarometer measure of trust among nations positively predicts venture capital firms' investment decisions, but that it has a negative correlation with successful exits. Our theory also predicts that earlier stage investments require higher trust, that syndication is more valuable in low-trust situations, and that higher trust investors use more contingent contracts. The empirical evidence supports these predictions. Received July 17, 2012; accepted March 15, 2016 by Editor Laura Starks.

The importance of trust for investment: evidence from venture capital

Bottazzi, Laura;Da Rin, Marco;
2016

Abstract

We examine the effect of trust in venture capital. Our theory predicts a positive relationship of trust with investment, but a negative relationship with success. Using a hand-collected dataset of European venture capital deals, we find that the Eurobarometer measure of trust among nations positively predicts venture capital firms' investment decisions, but that it has a negative correlation with successful exits. Our theory also predicts that earlier stage investments require higher trust, that syndication is more valuable in low-trust situations, and that higher trust investors use more contingent contracts. The empirical evidence supports these predictions. Received July 17, 2012; accepted March 15, 2016 by Editor Laura Starks.
2016
Bottazzi, Laura; Da Rin, Marco; Hellmann, Thomas
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11565/4047109
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