Self-selection and advice in venture capital finance

Arbeitspapier

In financing start-up firms, venture capitalists carefully select among alternative projects, design incentive compatible financial contracts and support portfolio companies with value enhancing managerial advice. This paper considers how venture capitalists can induce selfselection among entrepreneurial firms with different qualities by designing appropriate contracts and offering commercial support. We study the efficiency of the competitive market equilibrium with respect to the level and quality of entrepreneurship and the level of effort by entrepreneurs and venture capitalists. We also provide comparative statics results with respect to basic preference and technology parameters.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CESifo Working Paper ; No. 1909

Classification and Topics

• Classification: Wirtschaft ; Asymmetric and Private Information; Mechanism Design ; Investment Banking; Venture Capital; Brokerage; Ratings and Ratings Agencies ; New Firms; Startups
• Subject: Risikokapital ; Unternehmensgründung ; Unternehmer ; Moral Hazard

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Keuschnigg, Christian ; Nielsen, Søren Bo
• Event: Veröffentlichung
• (who): Center for Economic Studies and ifo Institute (CESifo)
• (where): Munich
• (when): 2007

Further information

• Handle: http://hdl.handle.net/10419/25954
• Last update: 10.03.2025, 11:42 AM CET