Scandinavian Working Papers in Economics
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Institute for Financial Research SIFR Research Report Series, Institute for Financial Research

No 14:
Characteristics, Contracts and Actions: Evidence from Venture Capitalist Analyses

Steven N. Kaplan and Per Strömberg

Abstract: We study the investment analyses of 67 portfolio investments by 11 venture capital (VC) firms. VCs describe the strengths and risks of the investments as well as expected post-investment monitoring. We classify the risks into three categories and relate them to VC cash flow rights, control rights, liquidation rights, contingencies, and monitoring. The internal risk results suggest that agency problems are important to contract design and monitoring. The external risk results are inconsistent with risk sharing, but, instead, consistent with certain types of monitoring and screening. Expected VC monitoring and support are related to the contracts.

Keywords: Investment banking; Venture capital; Brokerage; Financing policy; Capital and ownership structure; (follow links to similar papers)

JEL-Codes: G24; G32; (follow links to similar papers)

48 pages, June 15, 2003

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