RELATIONSHIP DISSOLUTION, RELATIONSHIP FORMATION, AND INTERPRETATION

This study delves into the simultaneous occurrence of relationship formation and dissolution within equity transactions in secondary markets, and its impact on subsequent financing for startup firms. Despite the coexistence of positive and negative information cues within these transactions, we posit that the adverse interpretation outweighs the favorable one in the decision-making processes of potential investors, consequently diminishing the likelihood of subsequent financing for the focal firm. Moreover, we contend that this negative effect is strengthened by the selling VC’s status, while mitigated by the acquiring investor’s status and start-up maturity.