Article Contents
Article Contents

# Angel capitalists exit decisions under information asymmetry: IPO or acquisitions

• * Corresponding author: Chuan Ding

The authors acknowledge the financial support by the National Natural Science Foundation of China (No.71603212, No.71701164, No. 71671142), by Humanities and Social Science Project of Ministry of Education of China (14XJCZH001), by Soft Science Research Project of Sichuan Province (2017ZR0118), and by the Fundamental Research Funds for the Central Universities(JBK1903005,JBK1805001)

• Angel capital is an important source of fund for start-ups. Based on the characteristics of angel investment market and the emotional factors between angel investor and entrepreneur, we establish two different principal-agent models to study their impact on different exit mechanisms i.e., IPO and acquisition. We find that: 1) In the case of IPO: as the entrepreneur's emotional factor increases, the optimal incentives decrease; but as the investor's emotional factor increases, the optimal incentives and the efforts increase. 2) When it comes to acquisitions: with the rising of entrepreneur's emotional factor, the optimal incentives decline; but the investor's emotional factor does not affect the optimal incentives and efforts. 3) Under certain conditions, the exit decision is influenced only by the entrepreneur's emotional factor. Moreover, IPO will be the best exit mechanism, only if the entrepreneur's emotional factor is greater than a unique threshold.

Mathematics Subject Classification: Primary: 90B50; Secondary: 91G50.

 Citation:

• Figure 1.  The Time Line

Figure 2.  $\mathop U\limits^ - = v = u = r = 0$, $\rho = 0.5$, ${k_g} = {k_m} = 5$, $\sigma _m = 5$

Figure 3.  $\mathop U\limits^ - = v = u = r = 0$, $\rho = 0.5$, ${k_g} = {k_m} = 5$, $\sigma _m = 5$

Figure 4.  $\mathop U\limits^ - = v = u = r = 0$, $\rho = 0.5$, ${k_g} = {k_m} = 5$, ${\sigma _m} = 5$

Figure 5.  $\mathop U\limits^ - = v = u = r = 0$, $\rho = 0.5$, ${k_g} = {k_m} = 5$, ${\sigma _m} = 5$

Figure 6.  km=kg=5, c=G=I=10, U=v=u=r=0

Figure 7.  U=v=u=r=0, τ=0.5, kg=km=5, G=I=10

Figure 8.  U=v=u=r=0, τ=0.5, kg=km=5, G=c=10

Figure 9.  U=v=u=r=0, τ=0.5, kg=5, G=c=I=10

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