Relating Sexually Predatory, Discriminatory Behavior to Private Capital Performance
Abstract. This paper is a study of the impact of sexually predatory and/or discriminatory behavior on the performance of venture capital and private equity funds. We contend that predatory and/or discriminatory behavior is a poor management practice resulting in organizational dysfunction and poor investment performance. We begin by introducing a Predatory Behavior Index at the scale of the fund, which we construct by establishing an order relation between different types of predatory behavior; gathering validated information from legal filings to score the index value; and computing the index value as a weighted sum from the scoring. We find statistically significant evidence that fund-level investment performance is negatively correlated with sexually predatory and/or discriminatory behavior …
Introduction. No scholarly research exists on the impact of sexually predatory and/or discriminatory behavior on the performance of venture capital and private equity funds. This is true despite the fact that aseries of recent (and not-so-recent) incidents and events have drawn attention to the prevalence of predatory behavior in the venture capital and private equity (VCPE) industry.1 One of these instances resulted in the shuttering of a high-flying VCPE firm after repeated complaints of harassment against one of its employees became public in 2017; another resulted in the departure of a senior partner from one of the industry’s most highly respected firms after a $50 million settlement he had reached with a former sex partner came to light…