Commitment signals in the interaction between business angels and entrepreneurs

Abstract

Stock volatility has raised some serious questions about the way some investors ascertain the true value of the quality of a venture proposition. Prior signaling theory argues that the amount of personal wealth offered by individual entrepreneurs as initial equity in a new venture, is a fitting indicator of the proposed project's quality. However, it has typically been focused only on the absolute amount of the initial capital invested by the entrepreneur, while this manuscript arguably demonstrates that a more appropriate signal is the actual proportion, since it signifies both the project's value and the entrepreneur's commitment to the project.

Citation

Prasad, D., Vozikis, G.S. and Bruton, G. (2001), "Commitment signals in the interaction between business angels and entrepreneurs", Libecap, G.D. (Ed.) Entrepreneurial inputs and outcomes: New studies of entrepreneurship in the United States (Advances in the Study of Entrepreneurship, Innovation and Economic Growth, Vol. 13), Emerald Group Publishing Limited, Leeds, pp. 45-69. https://doi.org/10.1016/S1048-4736(01)13004-3