The Journal of Finance

Venture Capital and the Professionalization of Start‐Up Firms: Empirical Evidence

Published: 12/17/2002   |   DOI: 10.1111/1540-6261.00419

Thomas Hellmann, Manju Puri

This paper examines the impact venture capital can have on the development of new firms. Using a hand‐collected data set on Silicon Valley start‐ups, we find that venture capital is related to a variety of professionalization measures, such as human resource policies, the adoption of stock option plans, and the hiring of a marketing VP. Venture‐capital‐backed companies are also more likely and faster to replace the founder with an outside CEO, both in situations that appear adversarial and those mutually agreed to. The evidence suggests that venture capitalists play roles over and beyond those of traditional financial intermediaries.

On the Life Cycle Dynamics of Venture‐Capital‐ and Non‐Venture‐Capital‐Financed Firms

Published: 11/19/2012   |   DOI: 10.1111/j.1540-6261.2012.01786.x

MANJU PURI, REBECCA ZARUTSKIE

We use data over 25 years to understand the life cycle dynamics of VC‐ and non‐VC‐financed firms. We find successful and failed VC‐financed firms achieve larger scale but are not more profitable at exit than matched non‐VC‐financed firms. Cumulative failure rates of VC‐financed firms are lower, with the difference driven largely by lower failure rates in the initial years after receiving VC. Our results are not driven by VCs disguising failures as acquisitions or by certain types of VCs. The performance difference between VC‐ and non‐VC‐financed firms narrows in the post‐internet bubble years, but does not disappear.

On the Benefits of Concurrent Lending and Underwriting

Published: 11/10/2005   |   DOI: 10.1111/j.1540-6261.2005.00816.x

STEVEN DRUCKER, MANJU PURI

This paper examines whether there are efficiencies that benefit issuers and underwriters when a financial intermediary concurrently lends to an issuer while also underwriting its public securities offering. We find issuers, particularly noninvestment‐grade issuers for whom informational economies of scope are likely to be large, benefit through lower underwriter fees and discounted loan yield spreads. Underwriters, both commercial banks as well as investment banks, engage in concurrent lending and provide price discounts, albeit in different ways. We find concurrent lending helps underwriters build relationships, increasing the probability of receiving current and future business.

A Tale of Two Runs: Depositor Responses to Bank Solvency Risk

Published: 05/20/2016   |   DOI: 10.1111/jofi.12424

RAJKAMAL IYER, MANJU PURI, NICHOLAS RYAN

We examine heterogeneity in depositor responses to solvency risk using depositor‐level data for a bank that faced two different runs. We find that depositors with loans and bank staff are less likely to run than others during a low‐solvency‐risk shock, but are more likely to run during a high‐solvency‐risk shock. Uninsured depositors are also sensitive to bank solvency. In contrast, depositors with older accounts run less, and those with frequent past transactions run more, irrespective of the underlying risk. Our results show that the fragility of a bank depends on the composition of its deposit base.

Institutional Allocation in Initial Public Offerings: Empirical Evidence

Published: 12/17/2002   |   DOI: 10.1111/1540-6261.00465

Reena Aggarwal, Nagpurnanand R. Prabhala, Manju Puri

We analyze institutional allocation in initial public offerings (IPOs) using a new data set of U.S. offerings between 1997 and 1998. We document a positive relationship between institutional allocation and day one IPO returns. This is partly explained by the practice of giving institutions more shares in IPOs with strong premarket demand, consistent with book‐building theories. However, institutional allocation also contains private information about first‐day IPO returns not reflected in premarket demand and other public information. Our evidence supports book‐building theories of IPO underpricing, but suggests that institutional allocation in underpriced issues is in excess of that explained by book‐building alone.

What Explains Differences in Finance Research Productivity during the Pandemic?

Published: 04/13/2021   |   DOI: 10.1111/jofi.13028

BRAD M. BARBER, WEI JIANG, ADAIR MORSE, MANJU PURI, HEATHER TOOKES, INGRID M. WERNER

Based on a survey of American Finance Association members, we analyze how demographics, time allocation, production mechanisms, and institutional factors affect research production during the pandemic. Consistent with the literature, research productivity falls more for women and faculty with young children. Independently, and novel, extra time spent on teaching (much more likely for women) negatively affects research productivity. Also novel, concerns about feedback, isolation, and health have large negative research effects, which disproportionately affect junior faculty and PhD students. Finally, faculty who express greater concerns about employers’ finances report larger negative research effects and more concerns about feedback, isolation, and health.