Figure 1.
The Time Line
-
Previous Article
Multi-period hazardous waste collection planning with consideration of risk stability
- JIMO Home
- This Issue
-
Next Article
The point-wise convergence of shifted symmetric higher order power method
January
2021, 17(1): 369-392.
doi: 10.3934/jimo.2019116
Angel capitalists exit decisions under information asymmetry: IPO or acquisitions
The School of Economic Mathematics, Southwestern University of Finance and Economics, 611130, WenJiang, Chengdu, China |
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:
Chuan Ding, Da-Hai Li. Angel capitalists exit decisions under information asymmetry: IPO or acquisitions. Journal of Industrial and Management Optimization,
2021, 17
(1)
: 369-392.
doi: 10.3934/jimo.2019116
![]()
References:
| [1] |
O. Bayar and T. J. Chemmanur,
IPOs versus acquisitions and the valuation premium puzzle: A theory of exit choice by entrepreneurs and venture capitalists, Journal of Financial and Quantitative Analysis, 46 (2011), 1755-1793.
doi: 10.1017/S0022109011000408. |
| [2] |
S. Bonini, V. Capizzi, M. Vallettab and P. Zocchi,
Angel network affiliation and business angels' investment practices, Journal of Corporate Finance, 50 (2018), 592-608.
doi: 10.1016/j.jcorpfin.2017.12.029. |
| [3] |
J. C. Brau, B. Francis and N. Kohers,
The choice of IPO versus takeover: Empirical evidence, The Journal of Business, 76 (2003), 583-612.
doi: 10.1086/377032. |
| [4] |
D. Cumming,
Contracts and exits in venture capital finance, The Review of Financial Studies, 21 (2008), 1947-1982.
doi: 10.1093/rfs/hhn072. |
| [5] |
J. Cvitanić and J. F. Zhang, Contract Theory in Continuous-Time Models, Springer Finance. Springer, Heidelberg, 2013.
doi: 10.1007/978-3-642-14200-0. |
| [6] |
P. Daniele, S. Giuffrè and S. Pia,
Competitive financial equilibrium problems with policy interventions, Journal of Industrial and Management Optimization, 1 (2005), 39-52.
doi: 10.3934/jimo.2005.1.39. |
| [7] |
F. Englmaier and A. Wambach,
Optimal incentive contracts under inequity aversion, Games and Economic Behavior, 69 (2010), 312-328.
doi: 10.1016/j.geb.2009.12.007. |
| [8] |
R. Elitzura and A. Gaviousb,
Contracting, signaling, and moral hazard: A model of entrepreneurs, `angels, ' and venture capitalists, Journal of Business Venturing, 18 (2003), 709-725.
doi: 10.1016/S0883-9026(03)00027-2. |
| [9] |
R. Fairchild,
An entrepreneur's choice of venture capitalist or angel-financing: A behavioral game-theoretic approach, Journal of Business Venturing, 26 (2011), 359-374.
doi: 10.1016/j.jbusvent.2009.09.003. |
| [10] |
S. He and C. W. Li,
Human capital, management quality, and the exit decisions of entrepreneurial firms, Journal of Financial and Quantitative Analysis, 51 (2016), 1269-1295.
doi: 10.1017/s0022109016000363. |
| [11] |
T. Hellmann and V. Thiele,
Friends or foes? The interrelationship between angel and venture capital markets, Journal of Financial Economics, 115 (2015), 639-653.
doi: 10.3386/w20147. |
| [12] |
B. Holmstrom and P. Milgrom,
The firm as an incentive system, American Economic Review, 84 (1994), 972-991.
|
| [13] |
L. A. Jeng and P. C. Wells,
The determinants of venture capital funding: Evidence across countries, Journal of Corporate Finance, 6 (2000), 241-289.
doi: 10.1016/S0929-1199(00)00003-1. |
| [14] |
C. N. V. Krishnan, V. I. Ivanov, R. W. Masulis and A. K. Singh,
Venture capital reputation, post-IPO performance and corporate governance, Journal of Financial and Quantitative Analysis, 46 (2011), 1295-1333.
doi: 10.1017/S0022109011000251. |
| [15] |
C. M. Mason and R. T. Harrison,
Closing the regional equity capital gap: The role of informal venture capital, Small Business Economics, 7 (1995), 153-172.
doi: 10.1007/BF01108688. |
| [16] |
C. Mitteness, R. Sudek and M. S. Cardon,
Angel investor characteristics that determine whether perceived passion leads to higher evaluations of funding potential, Journal of Business Venturing, 27 (2012), 592-606.
doi: 10.1016/j.jbusvent.2011.11.003. |
| [17] |
G. C. Murray and J. Lott,
Have venture capital firms a bias against investment in high technology companies, Research Policy, 24 (1995), 283-299.
|
| [18] |
P. Qian and W. Zhang,
Returns on chinese venture capital investment and its determinants, Economic Research Journal (In Chinese), 5 (2007), 78-90.
|
| [19] |
Y. Wang and Y. L. Rao,
Principal-agent model of angel investment based on fairness theory, Systems Engineering (In Chinese), 27 (2009), 72-76.
|
| [20] |
J. N. Wang, Y. Li and M. H. Liu,
A study on the development tendency and strategies of angel investment in China, Science Research Management (In Chinese), 10 (2015), 161-168.
|
| [21] |
X. L. Wang, Y. F. Lan and W. S. Tang,
An uncertain wage contract model for risk-averse worker under bilateral moral hazard, Journal of Industrial and Management Optimization, 13 (2017), 1815-1840.
doi: 10.3934/jimo.2017020. |
show all references
References:
| [1] |
O. Bayar and T. J. Chemmanur,
IPOs versus acquisitions and the valuation premium puzzle: A theory of exit choice by entrepreneurs and venture capitalists, Journal of Financial and Quantitative Analysis, 46 (2011), 1755-1793.
doi: 10.1017/S0022109011000408. |
| [2] |
S. Bonini, V. Capizzi, M. Vallettab and P. Zocchi,
Angel network affiliation and business angels' investment practices, Journal of Corporate Finance, 50 (2018), 592-608.
doi: 10.1016/j.jcorpfin.2017.12.029. |
| [3] |
J. C. Brau, B. Francis and N. Kohers,
The choice of IPO versus takeover: Empirical evidence, The Journal of Business, 76 (2003), 583-612.
doi: 10.1086/377032. |
| [4] |
D. Cumming,
Contracts and exits in venture capital finance, The Review of Financial Studies, 21 (2008), 1947-1982.
doi: 10.1093/rfs/hhn072. |
| [5] |
J. Cvitanić and J. F. Zhang, Contract Theory in Continuous-Time Models, Springer Finance. Springer, Heidelberg, 2013.
doi: 10.1007/978-3-642-14200-0. |
| [6] |
P. Daniele, S. Giuffrè and S. Pia,
Competitive financial equilibrium problems with policy interventions, Journal of Industrial and Management Optimization, 1 (2005), 39-52.
doi: 10.3934/jimo.2005.1.39. |
| [7] |
F. Englmaier and A. Wambach,
Optimal incentive contracts under inequity aversion, Games and Economic Behavior, 69 (2010), 312-328.
doi: 10.1016/j.geb.2009.12.007. |
| [8] |
R. Elitzura and A. Gaviousb,
Contracting, signaling, and moral hazard: A model of entrepreneurs, `angels, ' and venture capitalists, Journal of Business Venturing, 18 (2003), 709-725.
doi: 10.1016/S0883-9026(03)00027-2. |
| [9] |
R. Fairchild,
An entrepreneur's choice of venture capitalist or angel-financing: A behavioral game-theoretic approach, Journal of Business Venturing, 26 (2011), 359-374.
doi: 10.1016/j.jbusvent.2009.09.003. |
| [10] |
S. He and C. W. Li,
Human capital, management quality, and the exit decisions of entrepreneurial firms, Journal of Financial and Quantitative Analysis, 51 (2016), 1269-1295.
doi: 10.1017/s0022109016000363. |
| [11] |
T. Hellmann and V. Thiele,
Friends or foes? The interrelationship between angel and venture capital markets, Journal of Financial Economics, 115 (2015), 639-653.
doi: 10.3386/w20147. |
| [12] |
B. Holmstrom and P. Milgrom,
The firm as an incentive system, American Economic Review, 84 (1994), 972-991.
|
| [13] |
L. A. Jeng and P. C. Wells,
The determinants of venture capital funding: Evidence across countries, Journal of Corporate Finance, 6 (2000), 241-289.
doi: 10.1016/S0929-1199(00)00003-1. |
| [14] |
C. N. V. Krishnan, V. I. Ivanov, R. W. Masulis and A. K. Singh,
Venture capital reputation, post-IPO performance and corporate governance, Journal of Financial and Quantitative Analysis, 46 (2011), 1295-1333.
doi: 10.1017/S0022109011000251. |
| [15] |
C. M. Mason and R. T. Harrison,
Closing the regional equity capital gap: The role of informal venture capital, Small Business Economics, 7 (1995), 153-172.
doi: 10.1007/BF01108688. |
| [16] |
C. Mitteness, R. Sudek and M. S. Cardon,
Angel investor characteristics that determine whether perceived passion leads to higher evaluations of funding potential, Journal of Business Venturing, 27 (2012), 592-606.
doi: 10.1016/j.jbusvent.2011.11.003. |
| [17] |
G. C. Murray and J. Lott,
Have venture capital firms a bias against investment in high technology companies, Research Policy, 24 (1995), 283-299.
|
| [18] |
P. Qian and W. Zhang,
Returns on chinese venture capital investment and its determinants, Economic Research Journal (In Chinese), 5 (2007), 78-90.
|
| [19] |
Y. Wang and Y. L. Rao,
Principal-agent model of angel investment based on fairness theory, Systems Engineering (In Chinese), 27 (2009), 72-76.
|
| [20] |
J. N. Wang, Y. Li and M. H. Liu,
A study on the development tendency and strategies of angel investment in China, Science Research Management (In Chinese), 10 (2015), 161-168.
|
| [21] |
X. L. Wang, Y. F. Lan and W. S. Tang,
An uncertain wage contract model for risk-averse worker under bilateral moral hazard, Journal of Industrial and Management Optimization, 13 (2017), 1815-1840.
doi: 10.3934/jimo.2017020. |
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
| [1] |
Chong Zhang, Yaxian Wang, Haiyan Wang. Design of an environmental contract under trade credits and carbon emission reduction. Journal of Industrial and Management Optimization, 2021 doi: 10.3934/jimo.2021141 |
| [2] |
Qian Wei, Jianxiong Zhang, Xiaojie Sun. Incentive contract design for supplier switching with considering learning effect. Journal of Industrial and Management Optimization, 2021, 17 (6) : 3559-3580. doi: 10.3934/jimo.2020133 |
| [3] |
Chun-xiang Guo, Dong Cai, Yu-yang Tan. Outsourcing contract design for the green transformation of manufacturing systems under asymmetric information. Journal of Industrial and Management Optimization, 2021 doi: 10.3934/jimo.2021158 |
| [4] |
Kegui Chen, Xinyu Wang, Min Huang, Wai-Ki Ching. Salesforce contract design, joint pricing and production planning with asymmetric overconfidence sales agent. Journal of Industrial and Management Optimization, 2017, 13 (2) : 873-899. doi: 10.3934/jimo.2016051 |
| [5] |
Xiujing Dang, Yang Xu, Gongbing Bi, Lei Qin. Pricing strategy and product quality design with platform-investment. Journal of Industrial and Management Optimization, 2022 doi: 10.3934/jimo.2021224 |
| [6] |
Monika Joanna Piotrowska, Joanna Górecka, Urszula Foryś. The role of optimism and pessimism in the dynamics of emotional states. Discrete and Continuous Dynamical Systems - B, 2018, 23 (1) : 401-423. doi: 10.3934/dcdsb.2018028 |
| [7] |
Jeff Musgrave, James Watmough. Examination of a simple model of condom usage and individual withdrawal for the HIV epidemic. Mathematical Biosciences & Engineering, 2009, 6 (2) : 363-376. doi: 10.3934/mbe.2009.6.363 |
| [8] |
Cristian Morales-Rodrigo. A therapy inactivating the tumor angiogenic factors. Mathematical Biosciences & Engineering, 2013, 10 (1) : 185-198. doi: 10.3934/mbe.2013.10.185 |
| [9] |
Jun Wu, Shouyang Wang, Wuyi Yue. Supply contract model with service level constraint. Journal of Industrial and Management Optimization, 2005, 1 (3) : 275-287. doi: 10.3934/jimo.2005.1.275 |
| [10] |
Jérôme Buzzi. The degree of Bowen factors and injective codings of diffeomorphisms. Journal of Modern Dynamics, 2020, 16: 1-36. doi: 10.3934/jmd.2020001 |
| [11] |
Ridouan Bani, Rasheed Hameed, Steve Szymanowski, Priscilla Greenwood, Christopher M. Kribs-Zaleta, Anuj Mubayi. Influence of environmental factors on college alcohol drinking patterns. Mathematical Biosciences & Engineering, 2013, 10 (5&6) : 1281-1300. doi: 10.3934/mbe.2013.10.1281 |
| [12] |
Antoni Ferragut, Jaume Llibre, Adam Mahdi. Polynomial inverse integrating factors for polynomial vector fields. Discrete and Continuous Dynamical Systems, 2007, 17 (2) : 387-395. doi: 10.3934/dcds.2007.17.387 |
| [13] |
Zemer Kosloff, Terry Soo. The orbital equivalence of Bernoulli actions and their Sinai factors. Journal of Modern Dynamics, 2021, 17: 145-182. doi: 10.3934/jmd.2021005 |
| [14] |
Fangzhou Cai, Song Shao. Topological characteristic factors along cubes of minimal systems. Discrete and Continuous Dynamical Systems, 2019, 39 (9) : 5301-5317. doi: 10.3934/dcds.2019216 |
| [15] |
Gerhard Keller. Maximal equicontinuous generic factors and weak model sets. Discrete and Continuous Dynamical Systems, 2020, 40 (12) : 6855-6875. doi: 10.3934/dcds.2020132 |
| [16] |
Thomas Jordan, Mark Pollicott. The Hausdorff dimension of measures for iterated function systems which contract on average. Discrete and Continuous Dynamical Systems, 2008, 22 (1&2) : 235-246. doi: 10.3934/dcds.2008.22.235 |
| [17] |
Wucheng Zi, Jiayu Zhou, Honglei Xu, Guodong Li, Gang Lin. Preserving relational contract stability of fresh agricultural product supply chains. Journal of Industrial and Management Optimization, 2021, 17 (5) : 2505-2518. doi: 10.3934/jimo.2020079 |
| [18] |
Yafei Zu. Inter-organizational contract control of advertising strategies in the supply chain. Journal of Industrial and Management Optimization, 2021 doi: 10.3934/jimo.2021126 |
| [19] |
Sushil Kumar Dey, Bibhas C. Giri. Coordination of a sustainable reverse supply chain with revenue sharing contract. Journal of Industrial and Management Optimization, 2022, 18 (1) : 487-510. doi: 10.3934/jimo.2020165 |
| [20] |
Jiahao Qiu, Jianjie Zhao. Maximal factors of order $ d $ of dynamical cubespaces. Discrete and Continuous Dynamical Systems, 2021, 41 (2) : 601-620. doi: 10.3934/dcds.2020278 |
2020 Impact Factor: 1.801
Tools
Metrics
Other articles
by authors
[Back to Top]