The Role of Agents in Private Entrepreneurial Finance

We examine theory and evidence on agents in private-market entrepreneurial financings. After controlling for the endogenous issuer-agent matching and a whole host of other controls, the empirical findings in this paper indicate that agents attract more investors, broaden the geographic investor and capital base, and increase the percentage of investors and capital from investors that are more vulnerable to the costs of information asymmetry. We also find that more capable agents generally provide more valuable benefits to private entrepreneurial firm financings than less capable agents, and that increasing the number of agents in a financing further increases value to issuing firms.