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Venture Capital

The Impact of Asymmetric Information on Optimal Investments, Learning and Exit Outcomes

Tennert, Julius

Studienreihe der Stiftung Kreditwirtschaft an der Universität Hohenheim, Vol. 57

(2019)

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Table of Contents

Section Title Page Action Price
Preface 6
Contents 8
List of Figures 10
List of Tables 12
List of Abbreviations 14
1 Introduction 16
2 Moral Hazard in VC Finance 22
2.1 Introduction 22
2.2 Formal Model 25
2.2.1 The Entrepreneurial Project 25
2.2.2 Maximization Function of the VC 27
2.2.3 Participation Constraint of the Entrepreneur 27
2.2.4 Solution without Relevance of Human Capital 29
2.2.5 Solution with Relevance of Human Capital 30
2.2.6 Opportunity Loss of the VC 30
2.3 Empirical Approach 35
2.3.1 Sample 35
2.3.2 Econometric Method 35
2.3.3 Measures 37
2.3.4 Empirical Results 40
2.3.5 Robustness Checks 44
2.4 Conclusion 50
3 Learning in Funding Relationships 54
3.1 Introduction 54
3.2 Learning and Comprehensiveness 57
3.3 Frictions in the Learning Process 59
3.4 Formal Hypotheses 61
3.5 Data and Methodology 64
3.5.1 Sample 64
3.5.2 Measures 65
3.5.3 Econometric Specification 75
3.6 Results 78
3.6.1 Summary Statistics and Selection Regressions 78
3.7 Conclusion 87
4 VCs as Intermediaries in Exits 92
4.1 Introduction 92
4.2 Agency Cost in IPO and Trade Sale Exits 95
4.2.1 Adverse Selection Pre-Exit 95
4.2.2 Moral Hazard Post-Exit 96
4.3 Investor Characteristics 98
4.4 Firm Characteristics 101
4.5 Sample and Methodology 102
4.5.1 Sample 102
4.5.2 Methodology 103
4.5.3 Control Variables 104
4.6 Results 106
4.6.1 Descriptive Statistics 106
4.6.2 Multivariate Analysis 112
4.6.3 Classification Tree Analysis 117
4.7 Conclusion 129
5 Conclusion 132
5.1 Summary of the Main Results 132
5.2 Outlook 133
Bibliography 136