Venture Capitalists Investment Incentives Under Public Equity Schemes

Kiel Working Paper No. 1117

23 Pages Posted: 31 Jul 2002

Date Written: July 2002

Abstract

This paper analyses the impact of public equity schemes on venture capitalist's 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 insufficient 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

JEL Classification: D82, G24, G28, L14

Suggested Citation

Schertler, Andrea, Venture Capitalists Investment Incentives Under Public Equity Schemes (July 2002). Kiel Working Paper No. 1117, Available at SSRN: https://ssrn.com/abstract=318904 or http://dx.doi.org/10.2139/ssrn.318904

Andrea Schertler (Contact Author)

University of Graz ( email )

Universitaetsstrasse 15 / FE
A-8010 Graz, 8010
Austria

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