Signaling firm value to active investors

• 成果类型: Article; Proceedings Paper
• 署名作者: Baldenius, Tim; Meng, Xiaojing
• 署名单位: Columbia University
• 刊物名称: REVIEW OF ACCOUNTING STUDIES
• ISSN/ISSBN: 1380-6653
• DOI: 10.1007/s11142-010-9130-7
• 发表日期: 2010
• 页码: 584-619
• 关键词: venture; INVESTMENT; management; CONTRACTS

摘要

Active investors provide risk-sharing and value-adding effort in form of advising, networking, monitoring, etc. This paper demonstrates a conflict between two key objectives for high-quality entrepreneurs: to elicit such investor effort and to signal the firm's type by retaining shares. This conflict may give rise to stable (and economically meaningful) pooling equilibria for startup firms. More established firms, with access to multiple signals, can always realize both of these objectives but may still decide to forego investor effort if eliciting it would require them to deviate substantially from the cost-minimizing signal mix. In comparison with otherwise identical pure-exchange settings (with passive investors), we find that the potential for investors to be active always increases the signaling cost in case of noncontractible investor effort, whereas the effect is ambiguous if investor effort is contractible. At the same time, we identify conditions under which signaling is welfare-enhancing as it helps guide investors' effort towards more promising ventures.