NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Characteristics, Contracts, and Actions: Evidence from Venture Capitalist Analyses

Steven N. Kaplan, Per Stromberg

NBER Working Paper No. 8764
Issued in February 2002
NBER Program(s):   CF

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.

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Document Object Identifier (DOI): 10.3386/w8764

Published: Kaplan, Steven N. and Per Stromberg. "Characteristics, Contracts, And Actions: Evidence From Venture Capitalist Analyses," Journal of Finance, 2004, v59(5,Oct), 2177-2210. citation courtesy of

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