Characteristics, Contracts, and Actions:Evidence from Venture Capitalist Analyses

STEVEN N. KAPLAN and PER STR ¨ OMBERG    2004

ABSTRACT：
We study the investment analyses of 67 portfolio investments by 11 venture capital
(VC) firms. VCs describe the strengths and risks of the investments as well as expected
postinvestment actions. We classify the risks into three categories and relate them to
the allocation of cash flow rights, contingencies, control rights, and liquidation rights
between VCs and entrepreneurs. The risk results suggest that agency and hold-up
problems are important to contract design and monitoring, but that risk sharing is
not. Greater VC control is associated with increased management intervention, while
greater VC equity incentives are associated with increased value-added support.