Characteristics, Contracts and Actions: Evidence from Venture Capitalist Analyses

54 Pages Posted: 4 Apr 2002

See all articles by Steven N. Kaplan

Steven N. Kaplan

University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER)

Per Strömberg

Swedish House of Finance

Multiple version iconThere are 4 versions of this paper

Date Written: March 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.

Keywords: Investment banking, venture capital, financing policy, capital and ownership structure, brokerage

JEL Classification: G24, G32

Suggested Citation

Kaplan, Steven Neil and Stromberg, Per, Characteristics, Contracts and Actions: Evidence from Venture Capitalist Analyses (March 2002). CEPR Discussion Paper No. 3243. Available at SSRN: https://ssrn.com/abstract=306381

Steven Neil Kaplan (Contact Author)

University of Chicago - Booth School of Business ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
773-702-4513 (Phone)
773-702-0458 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Per Stromberg

Swedish House of Finance ( email )

Drottninggatan 98
111 60 Stockholm
Sweden

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