Voluntary Disclosure of Corporate Venture Capital Investments

Abstract

In this paper we investigate drivers of corporate venture capital investment announcements. Using a comprehensive sample of investments made by corporate venture capital programs of publicly listed US corporations, we find that about 2/3 of the investments are publicly announced. Consistent with voluntary information disclosure theories, we find that a public announcement is less likely when the startup is in the seed-stage, but more likely when the parent company is large, spends heavily in internal R&D and capital expenditures, has high leverage ratio, and faces more information asymmetry problems. These results are robust to controlling for syndicate size and structure. We further examine the stock price reaction to announcements. On average, the abnormal return of announced deals is around 2.1% at announcement date. Controlling for endogeneity of the announcement decision, we find that parent companies facing most severe asymmetric information problems enjoy highest abnormal returns.