Risk management in venture capital investor-investee relations

Reid, Gavin and Terry, N.G. and Smith, Julia (1997) Risk management in venture capital investor-investee relations. European Journal of Finance, 3 (1). pp. 27-47. ISSN 1351-847X (https://doi.org/10.1080/135184797337525)

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Abstract

This paper provides an empirical analysis of risk handling arrangements adopted in the relationship between the venture capital investor and his investee. The theoretical framework adopted is principal-agent analysis, which views the investee as a risk averse agent entering into a risk sharing contract with the investor, a risk neutral Fully diversified) principal. The sample analysed is made up of twenty venture capital investors in the UK over the period 1992-93, and (where available) their corresponding investee(s). These investors accounted for about three-quarters of venture capital activity in the UK over this period. The paper reports on evidence gathered by semi-structured interviews with investors and investees, on expected returns, portfolio balance, screening and risk sharing.

ORCID iDs

Reid, Gavin ORCID logoORCID: https://orcid.org/0000-0002-9446-9760, Terry, N.G. and Smith, Julia ORCID logoORCID: https://orcid.org/0000-0002-6186-1723;
CORE (COnnecting REpositories)