Essays on Similarities Between Executives and Investors

Abstract

The first chapter of my dissertation examines the effect of similarity in personal characteristics between start-up executives and investor principals on whether the start-up obtains funding from the investor, as well as the success of the start-ups. I find that while similarities in educational background, ethnicity, and cultural values between the start-up executives and investor principals are positively related to the likelihood of the start-up obtaining funding, these same similarities are negatively related to the likelihood of the start-up being acquired or going public. The second chapter of my dissertation examines whether social connections between hedge fund managers and portfolio firm executives provide a channel through which corporate information can be transmitted to financial markets. We examine hedge fund investments involved in mergers and acquisitions as a potential setting in which time-sensitive corporate information may flow to equity markets. We find that a net put (call) position held by the hedge fund in the acquirer prior to a merger can predict the merger announcement returns being negative (positive), and that the predictive power increases with the depth of the social connection.