Research

Michael Ewens, Jacob Faber

This paper examines the economics of providing retail investors access to private markets, analyzing how liquid fund structures interact with illiquid underlying assets. We study the trade-offs between democratized access to private equity and venture capital investments and the costs imposed by liquidity transformation, including potential return dilution and structural risks.

Michael Ewens, Xavier Giroud

We introduce a novel measure of corporate hierarchy for 3,454 U.S. public firms. We construct this measure using online resumes of 18.1 million employees and a network estimation technique that allows us to identify hierarchical layers. Firms have on average six hierarchical layers and a pyramidal organizational structure. Firms with more layers exhibit higher operating performance and produce more patents, but not higher-quality patents. At the same time, flatter firms fared better in response to the COVID-19 shock, consistent with greater organizational agility. Firms facing greater product market threats adopt flatter hierarchies. Moreover, firms increase their number of layers after going public, while they flatten their hierarchies following the adoption of artificial intelligence (AI).

Michael Ewens, Arpit Gupta, Sabrina Howell

This paper investigates the impact of private equity (PE) ownership on local daily newspapers, a struggling but democratically important industry. Using a comprehensive dataset of U.S. newspapers, we find nuanced effects: PE ownership leads to higher digital circulation and lower chances of newspaper exit, but also results in fewer reporters and editors, and a shift in content away from local governance toward national news. These findings highlight the trade-offs of PE ownership for institutional quality.

Michael Ewens, Matthew Rhodes-Kropf, Ilya Strebulaev

This paper investigates the outcomes of "insider financings" in venture capital, in which only existing investors participate, to test the hold-up theory. We find that, contrary to hold-up predictions, these rounds are associated with a likelihood of lower returns than rounds with new investors, suggesting that investors make inefficient continuation decisions. The study proposes an alternative explanation, arguing that the findings are consistent with an agency conflict between founders and existing investors.

Michael Ewens, Nadya Malenko

Journal of Finance

This paper examines how the composition and control of venture capital (VC)-backed startup boards evolve over the company's life cycle. Using novel data, we find that boards transition from being entrepreneur-controlled to VC-controlled, with independent directors playing a key role in mediating conflicts and later providing advice. The findings align with financial contracting theories and highlight the unique, evolving function of independent directors in startups.

Michael Ewens, Jun Chen

Journal of Finance

This paper investigates the causal role of venture capital supply in the geographic clustering of high-growth startups in the U.S. We exploit the 2013 Volcker Rule, which restricted bank investment in VC funds, as a quasi-natural experiment, noting its disproportionate impact on non-hub states that relied more heavily on bank capital. The difference-in-differences analysis finds that this restriction led to a decline in fund size and startup financing in affected regions, thereby contributing to increased geographic concentration of entrepreneurship.

Michael Ewens, Kairong Xiao, Ting Xu

Journal of Financial Economics

We estimate the regulatory costs of being a public company using bunching estimation techniques.

Michael Ewens, Ramana Nanda, Christopher Stanton

Journal of Finance

This paper investigates how founder-CEO compensation and the non-diversifiable risk faced by founders influence the selection of high-earning individuals into venture capital-backed entrepreneurship. Using a theoretical model and proprietary data, we find that cash compensation substantially increases after a startup's first product milestone, thereby alleviating risk and serving as a critical determinant of entrepreneurial talent supply.

Michael Ewens, Ryan Peters, Sean Wang

Management Science

This paper addresses the challenge of accurately measuring off-balance-sheet intangible capital, such as knowledge and organizational capital, which are typically expensed under current accounting standards. We propose a novel methodology to estimate the necessary capitalization parameters, specifically the R&D depreciation rate and the fraction of SG&A to be capitalized, by utilizing market prices from firm exits. The resulting intangible capital stocks are validated to outperform standard measures in explaining firm value.

Michael Ewens

This chapter addresses the research question of how gender and race contribute to discrimination and economic friction in entrepreneurial finance. It reviews an extensive empirical literature, detailing major discrimination theories and the methods used to test them, to synthesize the nuanced evidence on bias and differential treatment of underrepresented founders. The work aims to provide a framework for understanding the participation and financing gaps experienced by female and minority entrepreneurs.

Michael Ewens, Joan Farre-Mensa

Annual Review of Financial Economics

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.

Michael Ewens, Alex Gorbenko, Arthur Korteweg

Journal of Financial Economics

This paper investigates how venture capital contract terms affect startup success and the division of value between founders and investors. We develop a novel dynamic search and matching model, estimated using a large dataset of over 8,100 first-round VC financings. The results show that VCs use their bargaining power to secure investor-friendly terms that reduce the value of startups to founders while optimizing investor returns.

Michael Ewens, Joan Farre-Mensa

Review of Financial Studies

This paper investigates whether the decline in U.S. Initial Public Offerings (IPOs) is due to a failure in the public market or a shift in the going-public versus staying-private trade-off. We hypothesize that the deregulation of securities laws, specifically the National Securities Markets Improvement Act (NSMIA) of 1996, increased the supply of private capital. Using difference-in-differences and triple-difference analyses, the study finds that NSMIA facilitated late-stage startups remaining private, thereby explaining a significant portion of the IPO decline.

Michael Ewens, Rick Townsend

Journal of Financial Economics

This paper investigates whether early-stage investors exhibit gender bias by analyzing private interactions between investors and fundraising startups using a proprietary AngelList dataset. We find that male investors show less interest in female entrepreneurs compared to observably similar male counterparts, while female investors show more interest. The evidence, which is not driven by screening advantages or risk differences, suggests a gender bias consistent with male investor prejudice.

Michael Ewens, Matt Marx

Review of Financial Studies

This paper investigates whether venture capitalists' decision to replace a founder causally improves startup performance. We use a database of VC-backed startups and exploit state-level changes in non-compete agreement enforceability as an instrument for the supply of outside executives. The instrumented regression analysis suggests that founder replacement, contrary to naive regressions, is a specific mechanism by which VCs add value to their portfolio companies.

Michael Ewens, Ramana Nanda, Matthew Rhodes-Kropf

Journal of Financial Economics

This paper investigates how a technological shock that lowered the cost of starting new businesses has fundamentally altered the venture capital (VC) investment model over the last decade. We document an increased prevalence of a "spray and pray" approach, where VCs provide smaller initial funding and limited governance to a larger number of startups, which they are more likely to abandon early. This adaptation, driven by the higher value of abandonment options, has led to a disproportionate increase in early-stage seed funding.

Michael Ewens, Indraneel Chakraborty

Management Science

This paper investigates whether agency conflicts during venture capital (VC) fundraising lead to strategic investment behavior. We use novel investment-level data to show that VCs delay revealing negative fund performance information until after a new fund is successfully raised. This strategic delay, which is costly for limited partners, demonstrates that fundraising incentives significantly impact VC fund investment decisions.

Michael Ewens, Matthew Rhodes-Kropf

Journal of Finance

This paper investigates whether a venture capital firm's success is driven by its organizational capital or the human capital of its individual partners. Using a unique dataset of VC investments, we find that a partner's individual skill is two to five times more important than the firm's organizational structure in explaining performance. The results suggest that the partnership's value is not greater than the sum of its skilled members.

Michael Ewens, Bryan Tomlin, Liang Choon Wang

Review of Economics and Statistics

This paper investigates whether racial discrimination in the U.S. rental market is due to statistical discrimination or taste-based prejudice. We conduct a large-scale field experiment, sending over 14,000 rental inquiries with varying signals of applicant quality and race-associated names to landlords across 34 U.S. cities. The findings, which show differential treatment of signals by race and neighborhood composition, are consistent with a model of statistical discrimination rather than pure prejudice.

Michael Ewens, Charles Jones, Matthew Rhodes-Kropf

Review of Financial Studies

This research explores why diversifiable risk is priced in venture capital, a puzzle given the diversified nature of limited partners. We propose a novel theory based on a three-way principal-agent interaction between investors, VCs, and entrepreneurs that links contract design to asset prices. Empirical tests on a unique dataset of fund returns confirm the model's prediction: a strong correlation between total risk and net-of-fee investor returns.