Biases in Management Forecasts of Venture-Backed Start-Ups Revisited: Evidence from Internal Due Diligence Documents of VC Investors

Research Seminars

This study provides evidence of significant biases in multi-year management forecasts by analyzing a proprietary dataset on venture-backed start-ups in Germany. In contrast to prior research we do not detect "strategically" understated one-year-ahead forecasts for revenues and expenses. Rather, revenues and expenses are highly overstated in each of the investigated one-to five-year-ahead planning periods. Regarding the accuracy of the forecasts, further analyses uncover that prior start-up experience increases forecast biases while higher asset verifiability and corporate lead investors lead to smaller forecast errors. All key results hold if bias is either measured using a cross-sectional projection approach based on historical accounting data or by traditionally comparing forecasts to ex-post realizations. Consequently, we document that the so far unevaluated projection method developed by prior research performs well and has promising features for future research and practice.

Personen

Dr.  Sönke Sievers

Sönke Sievers // University of Cologne

Kontakt

Research Associate
Tereza Tykvova
Zum Profil

Anfahrt

Adresse

maps

Klicken Sie auf den unteren Button, um den Inhalt nachzuladen. (Ich bin damit einverstanden, dass mir externe Inhalte angezeigt werden. Mehr dazu in unserer Datenschutzerklärung.)

,
  • Raum Heinz König Hall