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Venture Capitalists Investment Incentives Under Public Equity Schemes

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  • Andrea Schertler

Abstract

This 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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File URL: https://www.econstor.eu/dspace/bitstream/10419/17781/1/kap1117.pdf
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Bibliographic Info

Paper provided by Kiel Institute for the World Economy in its series Kiel Working Papers with number 1117.

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Length: 21 pages
Date of creation: Jul 2002
Date of revision:
Handle: RePEc:kie:kieliw:1117

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Related research

Keywords: Double-sided moral hazard; public equity; venture capital;

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References

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  1. Christian Keuschnigg & Soren Nielsen, 2001. "Public Policy for Venture Capital," International Tax and Public Finance, Springer, Springer, vol. 8(4), pages 557-572, August.
  2. Brav, Alon & Gompers, Paul A, 1997. " Myth or Reality? The Long-Run Underperformance of Initial Public Offerings: Evidence from Venture and Nonventure Capital-Backed Companies," Journal of Finance, American Finance Association, American Finance Association, vol. 52(5), pages 1791-1821, December.
  3. Admati, Anat R & Pfleiderer, Paul, 1994. " Robust Financial Contracting and the Role of Venture Capitalists," Journal of Finance, American Finance Association, American Finance Association, vol. 49(2), pages 371-402, June.
  4. Schmidt, Klaus M., 1999. "Convertible Securities and Venture Capital Finance," CEPR Discussion Papers, C.E.P.R. Discussion Papers 2317, C.E.P.R. Discussion Papers.
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Cited by:
  1. Wolf, Björn, 2006. "Empirische Untersuchung zu den Einflussfaktoren der Finanzierungsprobleme junger Unternehmen in Deutschland und deren Auswirkungen auf die Wirtschaftspolitik," Working Papers "Firms and Region" U1/2006, Fraunhofer Institute for Systems and Innovation Research (ISI).
  2. 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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