Financing a portfolio of projects

This article shows that investors financing a portfolio of projects may use the depth of their financial pockets to overcome entrepreneurial incentive problems. Competition for scarce informed capital at the refinancing 
This article shows that investors financing a portfolio of projects may use the depth of their financial pockets to overcome entrepreneurial incentive problems. Competition for scarce informed capital at the refinancing stage strengthens investors’ bargaining positions. And yet, entrepreneurs’ incentives may be improved, because projects funded by investors with ‘‘shallow pockets’’ must have not only a positive net present value at the refinancing stage, but one that is higher than that of competing portfolio projects. Our article may help understand provisions used in venture capital finance that limit a fund’s initial capital and make it difficult to add more capital once the initial venture capital fund is raised. (JEL G24, G31)
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Metadaten
Author:Roman Inderst, Holger Müller, Felix Münnich
URN:urn:nbn:de:hebis:30-72945
URL:http://www.imfs-frankfurt.de/fileadmin/user_upload/pdf/WP_2009_34_Inderst.pdf
Parent Title (German):Working paper series / Institute for Monetary and Financial Stability ; 34
Series (Serial Number):Working Paper Series : Institute for Monetary and Financial Stability (34)
Document Type:Working Paper
Language:English
Year of Completion:2009
Year of first Publication:2009
Publishing Institution:Univ.-Bibliothek Frankfurt am Main
Release Date:2009/12/08
SWD-Keyword:Risikokapital
Note:
Published in: The Review of Financial Studies, 2007, vol. 20, issue 4, pp. 1289-1325
HeBIS PPN:220371032
Institutes: Institute for Monetary and Financial Stability (IMFS)
Dewey Decimal Classification:330 Wirtschaft
JEL-Classification:G24 Investment Banking; Venture Capital; Brokerage; Ratings and Ratings Agencies (Updated!)
G31 Capital Budgeting; Fixed Investment and Inventory Studies
Sammlungen:Universitätspublikationen
Licence (German):License Logo Veröffentlichungsvertrag für Publikationen

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