Performance hurdles in venture capital fund compensation

IF 7.5 1区经济学 Q1 BUSINESS, FINANCE

International Review of Financial Analysis Pub Date : 2025-02-27 DOI:10.1016/j.irfa.2025.104015

Jianwei Dong , Yuan-Teng Hsu , Guoping Shi , Siyuan Tan

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引用次数: 0

Abstract

The existing research provides limited insights into the compensation incentives of limited partnerships, particularly regarding performance hurdles. This study investigates how performance hurdles affect the appointment of venture capital (VC) directors to portfolio company boards. Utilizing mandatory disclosure data from Chinese listed companies acting as limited partners in VC funds, we construct a unique dataset of managerial incentive schemes covering 104 VC funds. Our findings reveal that higher performance hurdles significantly increase the likelihood of VC firms appointing directors to portfolio companies. This effect is more pronounced when VC funds invest in geographically proximate portfolio companies and when the company's CEO concurrently serves as a board chair (CEO duality). Moreover, by appointing VC directors, higher performance hurdles foster innovation and enhance the likelihood of successful initial public offerings for portfolio companies. These results highlight the pivotal role of performance hurdles in driving portfolio company growth by incentivizing greater engagement from VC fund managers.

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来源期刊

International Review of Financial Analysis BUSINESS, FINANCE-

CiteScore

10.30

自引率

9.80%

发文量

366

期刊介绍： The International Review of Financial Analysis (IRFA) is an impartial refereed journal designed to serve as a platform for high-quality financial research. It welcomes a diverse range of financial research topics and maintains an unbiased selection process. While not limited to U.S.-centric subjects, IRFA, as its title suggests, is open to valuable research contributions from around the world.