How Transparent are Firms About Their Corporate Venture Capital Investments?

Abstract

Corporate venture capital (CVC) is one of the most important avenues for corporate innovation today, yet there can be unintended consequences related to anticompetitive practices. Recent scrutiny from regulators and policymakers underscores their growing desire for more information about firms’ CVC investment activities, even of those previously believed to be too small to matter. Using a comprehensive sample of 115 publicly-listed U.S. parent firms that owned 133 CVC firms, we document that for almost half of the firm-years in our sample, parent firms do not disclose any information about their CVC program. Among the parent firms that do disclose their CVC activities, we find that they disclose less when they make investments in industries outside of their core industry. Firms with a CVC program, relative to similar firms without a CVC program, tend to make more future acquisitions and report less future goodwill asset write-downs. This study documents the current state of affairs with respect to the amount of publicly available CVC information for a large sample of firms, an important starting point for regulators and policymakers to conduct an informed debate about whether disclosure requirements should be expanded.