Venture Capital Directors and Corporate Debt Structure: An Empirical Analysis of Newly Listed Companies

Viet Anh Dang, Ahmet Karpuz, Abdul Mohamed

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Abstract

We investigate how venture capitalists (VCs) serving as directors on corporate boards affect portfolio companies’ debt structure after initial public offerings (IPOs). Using hand-collected data, we find that companies with a higher fraction of VC directors on their boards use significantly fewer types of debt. The impact of VC directorships on debt concentration is more pronounced in companies facing greater expected bankruptcy costs or higher degrees of uncertainty. We further explore the benefits of debt concentration and find that a highly concentrated debt structure is associated with better corporate performance in companies with VC directors. Taken together, our evidence suggests that VC directors influence newly listed companies to adopt a concentrated debt structure, thus minimizing the risk of distress and enhancing company value. Our results are robust to accounting for endogeneity and sample selection bias.
Original languageEnglish
Article number107031
JournalJournal of Banking and Finance
Volume157
Early online date24 Oct 2023
DOIs
Publication statusPublished - 1 Dec 2023

Keywords

  • Venture capital
  • board of directors
  • debt structure
  • IPO

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