Optimal investment, monitoring, and the staging of venture capital

Article Abstract:

This paper examines the structure of staged venture capital investments when agency and monitoring costs exist. Expected agency costs increase as assets become less tangible, growth options increase, and asset specificity rises. Data from a random sample of 794 venture capital-backed firms support the predictions. Venture capitalists concentrate investments in early stage and high-technology companies where informational symmetries are highest. Decreases in industry ratios of tangible assets to total assets, higher market-to-book ratios, and greater R&D intensities lead to more frequent monitoring. Venture capitalists periodically gather information and maintain the option to discontinue funding projects with little probability of going public. (Reprinted by permission of the publisher.)

Analysis, Investments, Venture capital

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Venture capitalists and the oversight of private firms

Article Abstract:

This article examines the representation of venture capitalists on the boards of private firms in their portfolios. If venture capitalists are intensive monitors of managers, their involvement as directors should be more intense when the need for oversight is greater. I show that venture capitalist' representation on the board increases around the time of chief executive office turnover, while the number of other outsiders remains constant. I also show that distance to the firm is an important determinant of the board membership of venture capitalists, as might be anticipated if the oversight of local firms is less costly than more distant businesses. (Reprinted by permission of the publisher.)

Management, Corporate directors, Private companies, Venture capital companies

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The really long-run performance of initial public offerings: the pre-Nasdaq evidence

Article Abstract:

An evaluation of 3,661 US initial public offerings, during a five-year period, from 1935-72 is provided.

United States, Going public (Securities), Initial public offerings, Company public offering

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