Kiel Working Papers, Kiel Institute for World Economics
No 1117:
Venture Capitalists Investment Incentives Under Public Equity Schemes
Andrea Schertler
Abstract: This paper analyses the impact of public equity schemes on
venture capitalists incentives to finance start-up enterprises and to
support the management teams. In a double-sided moral hazard model, it is
shown that experienced venture capitalists, who have already financed
start-up enterprises, reduce their intensity of management support under
public equity schemes. However, public equity offers inexperienced venture
capitalists, who have not yet financed start-up enterprises because of
insuf-ficient experience, incentives to enter the venture capital market so
that they can start to accumulate experience.
Keywords: Double-sided moral hazard, public equity, venture capital; (follow links to similar papers)
JEL-Codes: D82; G24; G28; L14; (follow links to similar papers)
21 pages, July 2002
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