David L. and Elsie M. Dodd Professor of Finance

Columbia Business School

New paper:”Race and Gender in Entrepreneurial Finance”

About

I am the David L. and Elsie M. Dodd Professor of Finance at Columbia Business School.  I am also a Research Associate at the National Bureau of Economic Research (NBER), an associate editor at the Review of Financial Studies, Journal of Financial Economics and Journal of Corporate Finance and co-editor of the Journal of Economics & Management Strategy.

I study the financing of high-growth startups and financial intermediation via venture capital and private equity. My research aims to understand if and how financial intermediaries in private equity add value, and when they do, what that teaches us about financing and operational frictions faced by companies.

Recent Research

January 2022, R&R

Local Journalism under Private Equity Ownership

With: 
Arpit Gupta and Sabrina Howell (NYU Stern)

Local daily newspapers have historically played an important role in U.S. democracy by providing citizens with information about local policy issues. However, in recent decades local newspapers have struggled to compete with new online platforms for readers’ attention. Private equity investors—who specialize in reorganizing struggling firms in distressed sectors—have entered the industry. How do these new owners affect newspaper content, survival, and local civic engagement? We document nuanced effects, contrasting with the polarized debate on this topic in the media and political discourse. On one hand, we find that private equity ownership leads to higher digital circulation and lower chances of newspaper exit. On the other hand, we document a change in news composition away from information about local governance, and lower employment of reporters and editors. Finally, we find declines in participation in local elections, consistent with local newspaper content being relevant for civic engagement. The results have implications for knowledge about local policy issues and highlight trade-offs surrounding media ownership.

February 2022, Annual Review of Financial Economics

Private or public equity? The evolving entrepreneurial finance landscape

With: Joan Farre-Mensa (Univ. of IL at Chicago)

The U.S. entrepreneurial finance market has changed dramatically over the last two decades. Entrepreneurs raising their first round of venture capital retain 30% more equity in their firm and are more likely to control their board of directors. Late-stage startups are raising larger amounts of capital in the private markets from a growing pool of traditional and new investors. These private market changes have coincided with a sharp decline in the number of firms going public—and when firms do go public, they are older and have raised more private capital. To understand these facts, we provide a systematic description of the differences between private and public firms. Next, we review several regulatory, technological, and competitive changes affecting both startups and investors that help explain how the trade-offs between going public and staying private have changed. We conclude by listing several open research questions.

March 2021, Working paper

Venture Capitalists’ Access to Finance and Its Impact on Startups

With: Jun Chen (Renmin Univ.)

Although an extensive literature shows that startups are financially constrained and constraints vary by geography, the source of these constraints is still relatively unknown. We explore a channel studied in the banking literature, but only implicitly addressed in the VC literature: intermediary financing constraints.

January 2022

Regulatory Costs of Being Public: Evidence from Bunching Estimation

With:
Kairong Xiao (Columbia) and Ting Xu (Univ. of VA)
Working Paper

Consistent with firms seeking to avoid costly regulation, we document significant bunching around multiple regulatory thresholds introduced from 1992 to 2012. We present a revealed preference estimation strategy that uses this behavior to quantify regulatory costs. Our estimates show that various disclosure and internal governance rules leads to a total compliance cost of 4.3% of the market capitalization for a median U.S. public firm.

September 2020, R&R

The Evolution of CEO Compensation in Venture Capital Backed Startups

With: 
Ramana Nanda (Imperial) and Christopher Stanton (HBS)

We document new facts on the evolution of founder-CEO compensation in venture capital-backed startups. Having a tangible product (“product market fit”) is a fundamental milestone in CEOs’ compensation, marking the point where liquid cash compensation increases significantly – well before an IPO or acquisition.

Ongoing Projects

Not all my projects are papers.  Here is a list of conferences and workshops that I co-organize, code and data associated with my papers and some longer-term initiatives.  Contact me if you want to learn more or get involved.

Workshop on Entrepreneurial Finance (WEFI)

A virtual workshop, seminar and lecture series featuring research in entrepreneurial finance and innovation.
WEFI site

Columbia Private Equity Conference

An annual conference bringing together leading academics studying private equity, venture capital and entrepreneurial finance.
Conference website

Data and Code

Repositories of both data and code from many of my research projects. Github page

Private or Public Equity?

Website companion to “Private or Public Equity? The Evolving Entrepreneurial Finance Landscape” (joint with Joan Farre-Mensa). Paper website