Informational holdup and performance persistence in venture capital

Yael V. Hochberg, Alexander Ljungqvist*, Annette Vissing-Jørgensen

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

69 Scopus citations


Why don't VCs eliminate excess demand for follow-on funds by raising fees? We propose a model of learning that leads to informational holdup. Current investors learn about skill whereas outside investors observe only returns. This gives current investors holdup power when the VC raises his next fund: Without their backing, no-one will fund him, as outside investors interpret the lack of backing as a sign of low skill. Holdup power diminishes the VC's ability to increase fees in line with performance, leading to return persistence. Empirical evidence supports the model. We estimate that up to two-thirds of VC firms lack skill.

Original languageEnglish (US)
Pages (from-to)102-152
Number of pages51
JournalReview of Financial Studies
Issue number1
StatePublished - Jan 2014


  • G24

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics


Dive into the research topics of 'Informational holdup and performance persistence in venture capital'. Together they form a unique fingerprint.

Cite this