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Characteristics, Contracts and Actions: Evidence from Venture Capitalist Analyses

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  • Kaplan, Steven N.

    (University of Chicago)

  • Strömberg, Per

    (Graduate School of Business)

Abstract

We study the investment analyses of 67 portfolio investments by 11 venture capital (VC) firms. VCs describe the strengths and risks of the investments as well as expected post-investment monitoring. We classify the risks into three categories and relate them to VC cash flow rights, control rights, liquidation rights, contingencies, and monitoring. The internal risk results suggest that agency problems are important to contract design and monitoring. The external risk results are inconsistent with risk sharing, but, instead, consistent with certain types of monitoring and screening. Expected VC monitoring and support are related to the contracts.

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Bibliographic Info

Paper provided by Institute for Financial Research in its series SIFR Research Report Series with number 14.

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Length: 48 pages
Date of creation: 15 Jun 2003
Date of revision:
Handle: RePEc:hhs:sifrwp:0014

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Keywords: Investment banking; Venture capital; Brokerage; Financing policy; Capital and ownership structure;

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