The Investor-Entrepreneur Relationship on Venture Capital: An Agent-Principal Approach
Posted: 30 Aug 2013
Date Written: November 30, 2012
In this article I review the venture capital investment as an Agent-Principal problem. Since the main subject of this work is the relationship between the Venture Capitalist (investor) and the Entrepreneur (investee), the former will be treated as Principal and the latter as Agent. After reviewing different works on the topic, a model is presented in order to determine the key elements in contract designing to avoid the customary problems in this kind of relationship, like moral hazard and adverse selection, due to the information asymmetry.
Keywords: Venture capital, entrepreneurship, asymmetric information, contracts
JEL Classification: G24, L26, D82, D86
Suggested Citation: Suggested Citation