Characteristics, Contracts and Actions: Evidence from Venture Capitalist Analyses

52 Pages Posted: 15 Jan 2002

See all articles by Steven N. Kaplan

Steven N. Kaplan

University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER); European Corporate Governance Institute (ECGI); University of Chicago - Polsky Center for Entrepreneurship

Per Strömberg

Swedish House of Finance; ECGI; CEPR

Multiple version iconThere are 4 versions of this paper

Date Written: January 2002

Abstract

We study the investment analyses of 67 portfolio investments by 11 venture capital (VC) firms. VCs consider the attractiveness and risks of the business, management, and deal terms as well as expected post-investment monitoring. We then consider the relation of the analyses to the contractual terms. Greater internal and external risks are associated with more VC cash flow rights, VC control rights; greater internal risk, also with more contingencies for the entrepreneur; and greater complexity, with less contingent compensation. Finally, expected VC monitoring and support are related to the contracts. We interpret these results in relation to financial contracting theories.

Suggested Citation

Kaplan, Steven Neil and Stromberg, Per, Characteristics, Contracts and Actions: Evidence from Venture Capitalist Analyses (January 2002). CRSP Working Paper No. 536, Available at SSRN: https://ssrn.com/abstract=296956 or http://dx.doi.org/10.2139/ssrn.296956

Steven Neil Kaplan

University of Chicago - Booth School of Business ( email )

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National Bureau of Economic Research (NBER)

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European Corporate Governance Institute (ECGI) ( email )

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University of Chicago - Polsky Center for Entrepreneurship

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Per Stromberg (Contact Author)

Swedish House of Finance ( email )

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ECGI ( email )

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