Kaplan Sensoy Stromberg (2009) - Should Investors Bet on the Jockey or the Horse

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Article
Has bibtex key
Has article title Should Investors Bet on the Jockey or the Horse
Has author Kaplan Sensoy Stromberg
Has year 2009
In journal
In volume
In number
Has pages
Has publisher
© edegan.com, 2016

Reference(s)

  • Kaplan, Steven, Berk Sensoy, and Per Stromberg (2009), "Should Investors Bet on the Jockey or the Horse? Evidence from the Evolution of Firms from Early Business Plans to Public Companies", Journal of Finance 64:1, 75-115. pdf

Abstract

We study how firm characteristics evolve from early business plan to initial public offering (IPO) to public company for 50 venture capital (VC)-financed companies. Firm business lines remain remarkably stable while management turnover is substantial. Management turnover is positively related to alienable asset formation. We obtain similar results using all 2004 IPOs, suggesting that our main results are not specific to VC-backed firms or the time period. The results suggest that, at the margin, investors in start-ups should place more weight on the business ("the horse") than on the management team ("the jockey"). The results also inform theories of the firm.