The Investor-Entrepreneur Relationship on Venture Capital: An Agent-Principal Approach

Posted: 30 Aug 2013

See all articles by John Rosso

John Rosso

UPTC - Faculty of Economics and Management Sciences; Universidad de Los Andes - Finance Department

Date Written: November 30, 2012

Abstract

In this article I review the venture capital investment as an Agent-Principal problem. Since the main subject of this work is the relationship between the Venture Capitalist (investor) and the Entrepreneur (investee), the former will be treated as Principal and the latter as Agent. After reviewing different works on the topic, a model is presented in order to determine the key elements in contract designing to avoid the customary problems in this kind of relationship, like moral hazard and adverse selection, due to the information asymmetry.

Keywords: Venture capital, entrepreneurship, asymmetric information, contracts

JEL Classification: G24, L26, D82, D86

Suggested Citation

Rosso, John, The Investor-Entrepreneur Relationship on Venture Capital: An Agent-Principal Approach (November 30, 2012). Available at SSRN: https://ssrn.com/abstract=2317567 or http://dx.doi.org/10.2139/ssrn.2317567

John Rosso (Contact Author)

UPTC - Faculty of Economics and Management Sciences ( email )

Av Central Norte -UPTC
Tunja, Boyaca 150001
Colombia
87441550 (Phone)

HOME PAGE: http://www.uptc.edu.co

Universidad de Los Andes - Finance Department ( email )

Carrera 1 # 18A-12
Bogota, D.C. 110311
Colombia

HOME PAGE: http://administracion.uniandes.edu.co

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