Atanasov, Hall, Ivanov & Litvak: Which Limited Partners Limit VC Opportunism?


We examine the response of different types of Limited Partners (LPs) to alleged opportunistic behavior on the part of Venture Capitalists (VCs). We use a sample of litigated VCs (identified by Atanasov, et al, 2012, Journal of Finance) to proxy for VC opportunistic behavior. Based on their presumed sensitivity to VC malfeasance and headline risk, we predict that university endowments and economic development authorities will be most likely to respond negatively to potential bad press. To test our hypothesis, we employ differences-in-differences (DiD) analysis and compare the participation of different types of LPs in VC funds before and after litigation relative to the LPs of otherwise similar, matched VCs that are not subject to litigation. We find that endowments reduce by more than 50% their participation in follow-on investment funds offered by litigated VCs relative to other types of LPs. Our results suggest that the threat of university endowment withdrawal of funding can deter VC opportunism.


Available for download here.



B1G Fundraising, 2012

Compiled from a recent report from the Council for Aid to Education, here are the B1G schools ranked by funds raised in 2012.  I’m not surprised to see Ohio State high on the list (go Bucks!), but the #1 school surprised me:

Indiana University


Ohio State University


University of Wisconsin-Madison


University of Michigan


Northwestern University


University of Illinois


Penn State University


University of Nebraska


Purdue University


Michigan State University


University of Iowa


University of Minnesota

n/A (didn’t respond)

My JD-granting alma mater, UCLA, received $344,201,149, almost exactly the same amount as Ohio State.  The big winner, with far more than any other school (including Harvard and Yale): Stanford, with $1,034,848,797.  Wow . . .

New Research: "The Management of Public Natural Resource Wealth"

I have posted to SSRN a draft of my paper “The Management of Public Natural Resource Wealth“, which expands on and revises an earlier draft on “American Sovereign Wealth.”  Here is the paper’s abstract:

As improved but often more environmentally-obtrusive technologies such as hydraulic fracturing facilitate the extraction of billions of dollars in natural resource wealth, more states are now faced with a welcome but exceedingly complex set of problems: Who should benefit from natural resources extracted from public lands? If the state retains much of this wealth in the form of tax receipts, how should these funds be spent? What do states owe to the communities from which these resources were extracted? What do states owe to future generations? While these are questions of first impression for a few, fortunate states, a number of states have been trying to address these issues for decades, and have enacted a variety of responses that have crucial implications for the states, their citizens, and their natural environments.

This article proceeds by providing in Part I historical background on the crucial legal developments which allowed state public natural resource funds to develop. In Part II, the article turns to the first of the two central questions by introducing the principal policy justifications of state public natural resource funds through a review of the stated objectives of the funds, the funds’ governance and distributions mechanisms, the role the funds play in state policy making and budgeting, and the aspects of federalism implicated by the state funds. Part III then analyzes the operations of the funds in light of the policy justifications identified in the article. The article concludes by showing how governance weaknesses often limit the effectiveness of funds in achieving their policy goals, and suggests ways in which states can create appropriate legal and governance structures to enhance their funds’ effectiveness.

Comments are welcome.

OSU Parking Deal Closing Tomorrow

The controversial (but in my opinion, wise) deal to lease OSU’s parking operations for the next 50 years is scheduled to close tomorrow.  The administration worked hard to bring the deal together and sell it to the Ohio State community.  Not everyone is convinced of the wisdom of the deal, but the difficult reality is that support from the state government is diminishing, and the university is going to have to be creative in finding ways to generate revenue (as an aside, OSU–like other universities–is still trying to figure out how to generate revenue from MOOCs facilitated by ventures like Coursera, which we just partnered with).

The parking lease nets OSU about $483 million.  Adding that to our roughly $2 billion-and-change endowment will move OSU up a few places in the ranking of university endowments market values.

For fun (and I acknowledge there are probably not many who think of this as “fun”), I made a chart showing the 5 largest university endowments and the 5 largest US state sovereign wealth funds (all figures in billions of dollars). 




Overall, there are a lot more universities with endowments in the billions than states with at least a billion  in AUM (only about 8 or 9).  However, note that state endowments (with the exception of the Texas PSF) are 1) younger, and 2) growing much more quickly since they are typically funded by oil and mineral extraction.  I expect that we will see a significant number of new state SWFs in this decade.