The Role of Venture Capital Firms' Experience, Ownership Structure, and of Direct Measures of Incentive Problems for Venture Capital Contracting in Germany

32 Pages Posted: 14 Jun 2007

See all articles by Ron C. Antonczyk

Ron C. Antonczyk

Aachen University - Department of Finance

Malte Brettel

Aachen University of Technology (RWTH)

Wolfgang Breuer

RWTH Aachen University

Date Written: June 14, 2007

Abstract

Using a hand-collected sample of contracts and investment proposals from German venture capital (VC) financing relationships, we find that experienced and or private law/independent VC firms rely to a lesser degree on debt financing and more on certain covenants in VC contracting even when we control for direct risk indicators as introduced by Kaplan and Strömberg (2004). However, risk indicators determine VC contracting even when differences in VC types are taken into account. Differences in risk perception across different VC types are not as pronounced as differences in contracting. This may imply that different VC types are primarily distinguished from each other by their respective capability of avoiding negative incentive effects of too tight contracting arrangements and only secondarily by their subjective evaluation of the relevance of certain incentive problems.

Keywords: Covenants, German capital market, risk indicators, venture capital, corporate governance

JEL Classification: D23, G24, G32

Suggested Citation

Antonczyk, Ron C. and Brettel, Malte and Breuer, Wolfgang, The Role of Venture Capital Firms' Experience, Ownership Structure, and of Direct Measures of Incentive Problems for Venture Capital Contracting in Germany (June 14, 2007). Available at SSRN: https://ssrn.com/abstract=993680 or http://dx.doi.org/10.2139/ssrn.993680

Ron C. Antonczyk

Aachen University - Department of Finance ( email )

Aachen
Germany

Malte Brettel

Aachen University of Technology (RWTH) ( email )

Templergraben 64
52056 Aachen, 52056
Germany
0049 241 80 96148 (Phone)

HOME PAGE: http://www.win.rwth-aachen.de

Wolfgang Breuer (Contact Author)

RWTH Aachen University ( email )

Templergraben 55
D-52056 Aachen, 52056
Germany

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