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Evaluation frequency and evaluator’s experience: the case of venture capital investment firms and monitoring intensity in stage financing

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  • Christian Hopp
  • Christian Lukas

Abstract

In this paper we analyze the relation between an investor’s experience and the intensity of monitoring activities. Specifically, we consider venture capitalist firms and their choices of time intervals between financing rounds. We hypothesize that more industry investment experience leads to longer time intervals between financing rounds and hence, lower monitoring intensity. Using a unique data set of venture capital firms from Germany during the period from 1995 to 2005 we find evidence for our hypothesis that in a given time frame more experienced investors evaluate and monitor their investments less often than less experienced investors. In addition, VC investors pool their experience and share the risk involved in investing by forming syndicates which reduces the incentives to monitor subsequently. On the basis of our results we argue that the optimal frequency of performance evaluations should take into account the experience of the evaluator. Copyright Springer Science+Business Media New York 2014

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  • Christian Hopp & Christian Lukas, 2014. "Evaluation frequency and evaluator’s experience: the case of venture capital investment firms and monitoring intensity in stage financing," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 18(2), pages 649-674, May.
    • Handle: RePEc:kap:jmgtgv:v:18:y:2014:i:2:p:649-674
    DOI: 10.1007/s10997-012-9231-8
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    3. Wang, Lei & Zhou, Fangzhao & An, Yunbi, 2017. "Determinants of control structure choice between entrepreneurs and investors in venture capital-backed startups," Economic Modelling, Elsevier, vol. 63(C), pages 215-225.

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