--- _id: '20870' abstract: - lang: eng text: This study shows how venture capital investors can identify potential biases in multi-year management forecasts before an investment decision and derive significantly more accurate failure predictions. By advancing a cross-sectional projection method developed by prior research and using firm-specific information in financial statements and business plans, we derive benchmarks for management revenue forecasts. With these benchmarks, we estimate forecast errors as an a priori measure of biased expectations. Using this measure for our proprietary dataset on venture-backed start-ups in Germany, we find evidence of substantial upward forecast biases. We uncover that firms with large forecast errors fail significantly more often than do less biased entrepreneurs in years following the investment. Overall, our results highlight the implications of excessive optimism and overconfidence in entrepreneurial environments and emphasize the relevance of accounting information and business plans for venture capital investment decisions. author: - first_name: Sönke full_name: Sievers, Sönke id: '46447' last_name: Sievers - first_name: Christopher Frederik full_name: Mokwa, Christopher Frederik last_name: Mokwa citation: ama: Sievers S, Mokwa CF. The Relevance of Biases in Management Forecasts for Failure Prediction in Venture Capital Investments.; 2012. doi:10.2139/ssrn.2100501 apa: Sievers, S., & Mokwa, C. F. (2012). The Relevance of Biases in Management Forecasts for Failure Prediction in Venture Capital Investments. https://doi.org/10.2139/ssrn.2100501 bibtex: '@book{Sievers_Mokwa_2012, title={The Relevance of Biases in Management Forecasts for Failure Prediction in Venture Capital Investments}, DOI={10.2139/ssrn.2100501}, author={Sievers, Sönke and Mokwa, Christopher Frederik}, year={2012} }' chicago: Sievers, Sönke, and Christopher Frederik Mokwa. The Relevance of Biases in Management Forecasts for Failure Prediction in Venture Capital Investments, 2012. https://doi.org/10.2139/ssrn.2100501. ieee: S. Sievers and C. F. Mokwa, The Relevance of Biases in Management Forecasts for Failure Prediction in Venture Capital Investments. 2012. mla: Sievers, Sönke, and Christopher Frederik Mokwa. The Relevance of Biases in Management Forecasts for Failure Prediction in Venture Capital Investments. 2012, doi:10.2139/ssrn.2100501. short: S. Sievers, C.F. Mokwa, The Relevance of Biases in Management Forecasts for Failure Prediction in Venture Capital Investments, 2012. date_created: 2021-01-05T11:59:50Z date_updated: 2022-01-06T06:54:41Z department: - _id: '275' doi: 10.2139/ssrn.2100501 extern: '1' jel: - G24 - G32 - M13 - M41 keyword: - Management forecast biases - cross-sectional projection models - venture-backed start-ups - failure prediction - overoptimism - overconfidence language: - iso: eng main_file_link: - url: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2100501 page: '31' publication_status: published status: public title: The Relevance of Biases in Management Forecasts for Failure Prediction in Venture Capital Investments type: working_paper user_id: '46447' year: '2012' ... --- _id: '5196' abstract: - lang: eng text: 'This study shows how venture capital investors can identify potential biases in multi-year management forecasts before an investment decision and derive significantly more accurate failure predictions. By advancing a cross-sectional projection method developed by prior research and using firm-specific information in financial statements and business plans, we derive benchmarks for management revenue forecasts. With these benchmarks, we estimate forecast errors as an a priori measure of biased expectations. Using this measure for our proprietary dataset on venture-backed start-ups in Germany, we find evidence of substantial upward forecast biases. We uncover that firms with large forecast errors fail significantly more often than do less biased entrepreneurs in years following the investment. Overall, our results highlight the implications of excessive optimism and overconfidence in entrepreneurial environments and emphasize the relevance of accounting information and business plans for venture capital investment decisions. ' author: - first_name: Christopher Frederik full_name: Mokwa, Christopher Frederik last_name: Mokwa - first_name: Sönke full_name: Sievers, Sönke last_name: Sievers citation: ama: Mokwa CF, Sievers S. The Relevance of Biases in Management Forecasts for Failure Prediction in Venture Capital Investments. SSRN Electronic Journal. 2012. doi:10.2139/ssrn.2100501 apa: Mokwa, C. F., & Sievers, S. (2012). The Relevance of Biases in Management Forecasts for Failure Prediction in Venture Capital Investments. SSRN Electronic Journal. https://doi.org/10.2139/ssrn.2100501 bibtex: '@article{Mokwa_Sievers_2012, title={The Relevance of Biases in Management Forecasts for Failure Prediction in Venture Capital Investments}, DOI={10.2139/ssrn.2100501}, journal={SSRN Electronic Journal}, author={Mokwa, Christopher Frederik and Sievers, Sönke}, year={2012} }' chicago: Mokwa, Christopher Frederik, and Sönke Sievers. “The Relevance of Biases in Management Forecasts for Failure Prediction in Venture Capital Investments.” SSRN Electronic Journal, 2012. https://doi.org/10.2139/ssrn.2100501. ieee: C. F. Mokwa and S. Sievers, “The Relevance of Biases in Management Forecasts for Failure Prediction in Venture Capital Investments,” SSRN Electronic Journal, 2012. mla: Mokwa, Christopher Frederik, and Sönke Sievers. “The Relevance of Biases in Management Forecasts for Failure Prediction in Venture Capital Investments.” SSRN Electronic Journal, 2012, doi:10.2139/ssrn.2100501. short: C.F. Mokwa, S. Sievers, SSRN Electronic Journal (2012). date_created: 2018-10-31T12:12:28Z date_updated: 2022-01-06T07:01:43Z department: - _id: '275' doi: 10.2139/ssrn.2100501 jel: - G24 - G32 - M13 - M41 keyword: - Management forecast biases - cross-sectional projection models - venture-backed start-ups - failure prediction - overoptimism - overconfidence language: - iso: eng publication: SSRN Electronic Journal publication_status: published status: public title: The Relevance of Biases in Management Forecasts for Failure Prediction in Venture Capital Investments type: journal_article user_id: '64756' year: '2012' ...