Review of Corporate Finance > Vol 3 > Issue 4

Monetary Policy and Venture Capital Markets

Cristiano Bellavitis, Whitman School of Management, Syracuse University, USA, , Christian Fisch, Interdisciplinary Centre for Security, Reliability and Trust (SnT), University of Luxembourg, Luxembourg, , Silvio Vismara, University of Bergamo, Department of Management, Italy,
Suggested Citation
Cristiano Bellavitis, Christian Fisch and Silvio Vismara (2023), "Monetary Policy and Venture Capital Markets", Review of Corporate Finance: Vol. 3: No. 4, pp 627-662.

Publication Date: 11 Sep 2023
© 2023 C. Bellavitis, C. Fisch and S. Vismara
New business financing
JEL Codes: G24, L26, O17, E1
Entrepreneurial financeventure capitalsupplynegative interest ratescentral bank ratesmonetary policy


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In this article:
Institutional and Theoretical Background 
Data and Variables 
Method and Results 


We assess the impact of monetary policy (i.e., central bank interest rates) on the activity of venture capitalists (VC). Using data from 31 countries from 2004 to 2019, we find that VC firms' fundraising activity increases when interest rates become negative. We explain this finding by referring to the principal-agent relationship between general and limited partners of VC firms in combination with behavioral finance arguments. Specifically, we identify three channels pertaining to a legal motivation (i.e., legislative hurdles and litigation risks), a liquidity motivation (i.e., substitution effect relative to other asset classes), and behavioral biases (i.e., mental accounting, conservatism, disposition effect, or prospect theory).



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