Corporate venture capital and CEO risk incentives: Evidence from venture capital-backed initial public offerings

This study examines the influence of corporate venture capital (CVC) participation on CEO compensation convexity, measured by vega, in VC-backed IPO firms. Our analysis shows that CEOs in CVC-backed IPOs exhibit higher vega than those financed solely by independent venture capitalists (IVCs). This pattern, however, gradually wanes in the years following the IPO. In addition, the positive association between CVC involvement and vega is more evident among firms with lower risk exposure, firms led by more risk-averse CEOs, and firms with greater growth opportunities. Overall, the results suggest that CEO compensation structures in CVC-backed IPOs are more closely aligned with shareholder interests through managerial risk-taking incentives, and that this relation varies with both firm- and CEO-level conditions.