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 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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Author:Roman InderstORCiDGND, Holger M. MüllerGND, Felix Münnich
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
Year of Completion:2009
Year of first Publication:2009
Publishing Institution:Universitätsbibliothek Johann Christian Senckenberg
Release Date:2009/12/08
GND Keyword:Risikokapital
Published in: The Review of Financial Studies, 2007, vol. 20, issue 4, pp. 1289-1325
Institutes:Wissenschaftliche Zentren und koordinierte Programme / Institute for Monetary and Financial Stability (IMFS)
Dewey Decimal Classification:3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft
Licence (German):License LogoDeutsches Urheberrecht