Venture Capitalists Investment Incentives Under Public Equity Schemes
AbstractThis paper analyses the impact of public equity schemes on venture capitalistÂ’s incentives to finance start-up enterprises and to support the management teams. In a double-sided moral hazard model, it is shown that experienced venture capitalists, who have already financed start-up enterprises, reduce their intensity of management support under public equity schemes. However, public equity offers inexperienced venture capitalists, who have not yet financed start-up enterprises because of insuf-ficient experience, incentives to enter the venture capital market so that they can start to accumulate experience.
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Bibliographic InfoPaper provided by Kiel Institute for the World Economy in its series Kiel Working Papers with number 1117.
Length: 21 pages
Date of creation: Jul 2002
Date of revision:
Double-sided moral hazard; public equity; venture capital;
Find related papers by JEL classification:
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
- G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
- L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
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- Andrea Schertler, 2002. "Comparative Advantages of Public Loan and Public Equity Schemes in Venture Capital Markets," Kiel Working Papers 1118, Kiel Institute for the World Economy.
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