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http://hdl.handle.net/10397/11691
Title: | When should venture capitalists exit their investee companies? | Authors: | Li, X Tan, HH Wilson, C Wu, Z |
Keywords: | Exit strategy Investee companies Optimal control Optimal stopping Venture capital Venture capitalist |
Issue Date: | 2013 | Source: | International journal of managerial finance, 2013, v. 9, no. 4, p. 351-364 How to cite? | Journal: | International Journal of Managerial Finance | Abstract: | Purpose: Exit strategies are critical for external private equity holders, such as venture capitalists and business angels, to receive investment returns successfully. The paper models the exit decision as a fixed date with the option to exit early, and develop an approach to help private equity holders determine an optimal early exit region based on a target equity value and the time remaining. Design/methodology/approach: The paper sets up a continuous time model to derive analytical solutions and apply simulations to numerical examples in this study. Findings: By numerically analyzing the nature of the solution the paper illustrates that a higher return drift of the investee company, a lower return volatility of the investee company, and a higher target return of the private equity holder results a smaller early exit region. Originality/value: This study helps determine the optimal time of stopping investments, and provides venture capitalists with a usable way to make exit decisions. | URI: | http://hdl.handle.net/10397/11691 | ISSN: | 1743-9132 | DOI: | 10.1108/IJMF-01-2013-0003 |
Appears in Collections: | Journal/Magazine Article |
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