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Venture Capital and Private Equity Contracting - An International Perspective
of: Douglas J. Cumming, Sofia A. Johan
Elsevier Trade Monographs, 2009
ISBN: 9780080917542 , 792 Pages
Format: PDF
Copy protection: DRM
Front Cover
1
Venture Capital and Private Equity Contracting
4
Copyright Page
5
Contents
8
Preface
10
Part One: Introduction
16
Chapter 1. Introduction and Overview
18
1.1 What Are Venture Capital and Private Equity?
18
1.2 How Do Venture Capital and Private Equity Differ from Alternative Sources of Capital?
22
1.3 How Large Is the Market for Venture Capital and Private Equity?
30
1.4 What Issues Are Relevant to the Study of Venture Capital and Private Equity?
33
Chapter 2. Overview of Agency Theory
42
2.1 Introduction and Learning Objectives
42
2.2 Forms of Finance
43
2.3 Agency Problems
47
2.4 Does Mitigating Agency Problems Enhance Firm Value?
60
2.5 Summary and Steps Forward in Remaining Chapters
62
Key Terms
63
Discussion Questions
63
Chapter 3. Overview of Institutional Contexts, Empirical Methods
66
3.1 Introduction and Learning Objectives
66
3.2 An Overview of the International Institutional and Legal Context
66
3.3 Statistics and Econometrics Used in This Book
72
3.4 Summary
80
Key Terms
81
Key Statistical and Econometric Terms
81
Discussion Questions
81
Part Two: Fund Structure and Governance
82
Chapter 4. What Should Fund Managers Care About? Perspectives from Institutional Investors
84
4.1 Introduction and Learning Objectives
84
4.2 Institutional Investor Objectives from Investment in Private Equity
85
4.3 Summary
105
Key Terms
105
Discussion Questions
106
Chapter 5. Limited Partnership Agreements
108
5.1 Introduction and Learning Objectives
108
5.2 Types of Restrictive Covenants
109
5.3 What Affects the Frequency of Use of Limited Partnership Covenants?
113
5.4 Survey of Private Equity Funds
115
5.5 Econometric Tests
126
5.6 Limitations, Alternate Explanations, and Future Research
140
5.7 Conclusions
141
Key Terms
142
Discussion Questions
142
Chapter 6. Compensation Contracts
144
6.1 Introduction and Learning Objectives
144
6.2 Compensation Contracts in Limited Partnerships
145
6.3 What Affects the Design of Limited Partnership Compensation Contracts?
146
6.4 Data
149
6.5 Econometric Tests
158
6.6 Limitations, Alternate Explanations, and Future Research
173
6.7 Conclusions
175
Key Terms
176
Discussion Questions
176
Chapter 7. Fundraising and Regulation
178
7.1 Introduction and Learning Objectives
178
7.2 Regulation of Institutional Investors and Fund Managers
179
7.3 Legal and Institutional Details and Testable Hypotheses
181
7.4 Data
185
7.5 Multivariate Analyses
207
7.6 Extensions and Future Research
218
7.7 Conclusions
219
Key Terms
220
Discussion Questions
221
Chapter 8. Specialized Investment Mandates
222
8.1 Introduction and Learning Objectives
222
8.2 Why Socially Responsible Investments in Private Equity? Testable Hypotheses
224
8.3 Data
229
8.4 Multivariate Empirical Analyses
243
8.5 Extensions and Future Research
252
8.6 Conclusions
253
Key Terms
254
Discussion Questions
254
Chapter 9. The Role of Government and Alternative Policy Options
256
9.1 Introduction and Learning Objectives
256
9.2 Taxation
257
9.3 Securities Laws
268
9.4 Regulation Pertaining to the Demand for Entrepreneurial Capital
268
9.5 Regulations Pertaining to the Supply of Entrepreneurial Capital
269
9.6 Direct Government Investment Programs
271
9.7 Summary
293
Key Terms
294
Discussion Questions
294
Part Three: Financial Contracting between Funds and Entrepreneurs
296
Chapter 10. The Investment Process
298
10.1 Introduction and Learning Objectives
298
10.2 Due Diligence
298
10.3 Stage of Development and Industry
300
10.4 Staging
301
10.5 Fund Flows and Valuations
303
10.6 Syndication
304
10.7 Board Seats
306
10.8 Contract Terms
307
10.9 Summary
309
Key Terms
310
Discussion Questions
310
Chapter 11. Security Design
312
11.1 Introduction and Learning Objectives
312
11.2 Theory and Hypotheses
316
11.3 Data
328
11.4 Empirical Tests
335
11.5 Limitations, Alternative Explanations, and Future Research
362
11.6 Conclusions
364
Appendix
365
Key Terms
372
Discussion Questions
373
Chapter 12. Security Design and Adverse Selection
374
12.1 Introduction and Learning Objectives
374
12.2 Adverse Selection, Capital Structure, Firm Characteristics, and Syndication
375
12.3 Data
379
12.4 Empirical Evidence
385
12.5 Conclusions
401
Key Terms
402
Discussion Questions
403
Chapter 13. Corporate Venture Capital Fund Contracts
404
13.1 Introduction and Learning Objectives
404
13.2 Financial Contracting in Venture Capital
405
13.3 U.S. and Canadian Corporate and Limited Partnership Venture Capital Fund Investments in Canadian Entrepreneurial Firms
410
13.4 European Corporate Venture Capital Fund Investments
417
13.5 Venture Capital Fund Contracts, Exits, and Returns Performance
418
13.6 Lessons for Corporations Setting Up Venture Capital Funds
420
13.7 Concluding Remarks and Future Research
421
Key Terms
423
Discussion Questions
423
Chapter 14. Preplanned Exits and Contract Design
424
14.1 Introduction and Learning Objectives
424
14.2 Hypotheses
426
14.3 Data
430
14.4 Multivariate Tests
442
14.5 Limitations and Future Research
459
14.6 Conclusions
461
Key Terms
462
Discussion Questions
462
Part Four: Investor Effort
464
Chapter 15. Investor Value-added
466
15.1 Introduction and Learning Objectives
466
15.2 Innovation and Efficiency
466
15.3 Do Contract Terms Facilitate Investor Effort?
468
15.4 Location
469
15.5 Portfolio Size
471
15.6 Investment Duration
471
15.7 Summary
471
Key Terms
472
Discussion Questions
472
Chapter 16. Contracts and Effort
474
16.1 Introduction and Learning Objectives
474
16.2 Hypotheses
476
16.3 Methodology
480
16.4 The Dataset
488
16.5 Econometric Analysis
499
16.6 Limitations, Alternative Explanations, and Future Research
514
16.7 Conclusions
516
Key Terms
517
Discussion Questions
517
Chapter 17. Home Bias
518
17.1 Introduction and Learning Objectives
518
17.2 Institutional Structure, Prior Research, and Testable Hypotheses
520
17.3 Data
524
17.4 Multivariate Logit Tests
534
17.5 The Scope of the Data and Generalizations That Can Be Drawn from the Empirical Analysis
544
17.6 Conclusions and Implications
545
Key Terms
546
Discussion Questions
546
Chapter 18. Portfolio Size
548
18.1 Introduction and Learning Objectives
548
18.2 Comparative Statistics and Hypotheses
549
18.3 Data
554
18.4 Empirical Evidence
567
18.5 Conclusions
589
Appendix
590
Key Terms
594
Discussion Questions
594
Part Five: Divestment
596
Chapter 19. The Divestment Process
598
19.1 Introduction and Learning Objectives
598
19.2 The Economics of Initial Public Offerings
600
19.3 Investment Duration and Time to Exit
603
19.4 The Mode of Exit
607
19.5 International Exit Statistics
609
19.6 Summary
611
Key Terms
612
Discussion Questions
612
Chapter 20. Exit Outcomes
614
20.1 Introduction and Learning Objectives
614
20.2 Hypotheses
615
20.3 Data
624
20.4 Regression Analyses
646
20.5 Conclusions
661
Key Terms
662
Discussion Questions
663
Chapter 21. Contracts and Exits
664
21.1 Introduction and Learning Objectives
664
21.2 Hypotheses
665
21.3 Variables in the Econometric Specifications
669
21.4 Data
675
21.5 Multivariate Regressions
678
21.6 Conclusions
711
Key Terms
711
Discussion Questions
711
Chapter 22. Valuation, Returns, and Disclosure
714
22.1 Introduction and Learning Objectives
714
22.2 Venture Capital Valuation Method
715
22.3 Factors That Affect Venture Capital Realized Returns and Reported Unrealized Returns
718
22.4 Conclusions and Remarks
733
Key Terms
734
Discussion Questions
734
Part Six: Conclusion
736
Chapter 23. Summary and Concluding Remarks
738
Online Appendices
742
References
744
Index
770
A
770
B
771
C
771
D
773
E
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F
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G
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H
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I
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L
780
M
780
N
781
O
781
P
781
R
782
S
783
T
784
U
784
V
785
W
785
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