Risk Management in Venture Capital Investor-Investee Relations
AbstractThis paper provides an empirical analysis of risk handling arrangements adopted in the relationship between the venture capital investor and his investee. The theoretical framework adopted is principal-agent analysis, which views the investee as a risk averse agent entering into a risk sharing contract with the investor, a risk neutral (fully diversified) principal. The sample analysed is made up of twenty venture capital investors in the UK over the period 1992-93, and (where available) their corresponding investee(s). These investors accounted for about three quarters of venture capital activity in the UK over this period. The paper reports on evidence gathered by semi-structured interviews with investors and investees, on expected returns, portfolio balance, screening and risk sharing.
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Bibliographic InfoPaper provided by Centre for Research into Industry, Enterprise, Finance and the Firm in its series CRIEFF Discussion Papers with number 9505.
Date of creation: Oct 1995
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venture capital; risk management; information asymmetry; investor-investee relations;
Other versions of this item:
- G. C. Reid & N. G. Terry & J. A. Smith, 1997. "Risk management in venture capital investor?investee relations," European Journal of Finance, Taylor and Francis Journals, vol. 3(1), pages 27-47.
- D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
- G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
- L84 - Industrial Organization - - Industry Studies: Services - - - Personal, Professional, and Business Services
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