Agency Theory and Its Application to Small Firms: Evidence from the Swedish Venture Capital Market
AbstractThe research in small firms financing is characterized by a lack of a theoretical framework. One basic assumption in this study is that agency theory can provide an essential framework to explain the interaction between informal and formal venture capitalists and their portfolio firms. Five hypotheses generated from agency theory are formulated and tested on 62 firms backed by informal venture capitalists and 145 firms backed by formal venture capitalists. The theoretical conclusion is that agency theory does not provide a satisfactory framework to explain either the informal venture capitalist’s, nor the formal venture capitalist’s relationship to their portfolio firms. Therefore, more exploratory research must be done to develop a theory of finance which will be applicable in the small firms situation.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by Pepperdine University, Graziadio School of Business and Management in its journal Journal of Small Business Finance.
Volume (Year): 2 (1993)
Issue (Month): 3 (Summer)
Capital; Venture Capital; Agency Theory; Small Firms; Small Business; Sweden;
Find related papers by JEL classification:
- G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
- L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
- G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Fama, Eugene F & Jensen, Michael C, 1983. "Separation of Ownership and Control," Journal of Law and Economics, University of Chicago Press, University of Chicago Press, vol. 26(2), pages 301-25, June.
- Kathleen M. Eisenhardt, 1985. "Control: Organizational and Economic Approaches," Management Science, INFORMS, INFORMS, vol. 31(2), pages 134-149, February.
- Maier, John II & Walker, David A., 1987. "The role of venture capital in financing small business," Journal of Business Venturing, Elsevier, vol. 2(3), pages 207-214.
- Haar, Nancy E. & Starr, Jennifer & MacMillan, Ian C., 1988. "Informal risk capital investors: Investment patterns on the East Coast of the U.S.A," Journal of Business Venturing, Elsevier, vol. 3(1), pages 11-29.
- Fama, Eugene F, 1980. "Agency Problems and the Theory of the Firm," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 88(2), pages 288-307, April.
- Harris, Milton & Raviv, Artur, 1979. "Optimal incentive contracts with imperfect information," Journal of Economic Theory, Elsevier, Elsevier, vol. 20(2), pages 231-259, April.
- William G. Ouchi, 1979. "A Conceptual Framework for the Design of Organizational Control Mechanisms," Management Science, INFORMS, INFORMS, vol. 25(9), pages 833-848, September.
- James S. Ang, 1991. "Small Business Uniqueness and the Theory of Financial Management," Journal of Entrepreneurial Finance, Pepperdine University, Graziadio School of Business and Management, Pepperdine University, Graziadio School of Business and Management, vol. 1(1), pages 1-13 , Spring.
- Jensen, Michael C. & Meckling, William H., 1976. "Theory of the firm: Managerial behavior, agency costs and ownership structure," Journal of Financial Economics, Elsevier, Elsevier, vol. 3(4), pages 305-360, October.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Craig Everett).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.