Essays in corporate venture capital

The dissertation focuses the role of corporate venture capitalists (CVCs) in the financing and development of startup firms. Specifically, I examine three important issues. First, I try to determine whether CVCs provide quality certification to venture-backed firms that go public by examining the offer date valuations of a sample of initial public offerings (IPOs). I document that IPO firms with CVC presence have significantly higher valuations that other types of IPOs on the offer date and in the long run. These valuations are higher in the cases of strategic CVC investments.; Second, I investigate whether CVCs are better at nurturing and developing startups rather then simply selecting and financing good projects. Using a sample of venture-backed IPOs, I document that CVCs provide a range of valuable services to their portfolio firms and some of these services have a positive and significant impact on firms' post-IPO cash flows, investments, and profit margins. Controlling for the endogeneity of CVC financing, I study the long-run operating performance of different types of CVC investments and find that CVC-backed IPOs with nurturing relations significantly underperform CVC-backed IPOs with other services or pure selectivity and a control sample of IPOs backed by traditional venture firms. The findings are consistent with the conclusion that CVCs, despite the valuable services they provide, are better project selectors than nurturers.; Lastly, I analyze the time series dynamics of venture capital (VC) investments. The empirical evidence supports the argument that active IPO and M&A markets lead to larger VC investments. Interestingly, the impact of the M&A market is stronger in the 1990s. On the other hand, the business cycle and investor sentiment do not seem to have any explanatory power. The study also examines the determinants of early-stage and late-stage VC investments. The evidence suggests that the business cycle and the investor sentiment have a significant impact on late-stage investments but not on early-stage investments. The analysis also implies that active IPO and M&A markets are important for early and late-stage investments, but only in the period 1999--2000.