Building Relationships Early: Banks in Venture Capital

This paper examines bank behavior in venture capital. It considers the relation between a bank's venture capital investments and its subsequent lending, which can be thought of as intertemporal cross-selling. Theory suggests that unlike independent venture capital firms, banks may be strategic...

Full description

Saved in:
Bibliographic Details
Published in:The Review of financial studies 2008-04, Vol.21 (2), p.513-541
Main Authors: Hellmann, Thomas, Lindsey, Laura, Puri, Manju
Format: Article
Language:English
Subjects:
Access to credit
Bank capital
Bank loans
Bank markets
Banking
Banking industry
Banking regulation
Business investment
Business partnership
Business structures
Capital markets
Central banks
Corporate finance
Equity
Financial investments
Financing methods
Hypotheses
Investment banking
Investors
Lending institutions
Loans
Market strategy
Relationship banking
Retail banking
Startups
Studies
Universal banking
Venture capital
Citations: Items that this one cites
Items that cite this one
Online Access:Get full text
Tags: Add Tag
No Tags, Be the first to tag this record!
Description
Summary:This paper examines bank behavior in venture capital. It considers the relation between a bank's venture capital investments and its subsequent lending, which can be thought of as intertemporal cross-selling. Theory suggests that unlike independent venture capital firms, banks may be strategic investors who seek complementarities between venture capital and lending activities. We find evidence that banks use venture capital investments to build lending relationships. Having a prior relationship with a company in the venture capital market increases a bank's chance of subsequently granting a loan to that company. Companies can benefit from these relationships through more favorable loan pricing.
ISSN:0893-9454
1465-7368
DOI:10.1093/rfs/hhm080