Post Investment Demand for Accounting Information by Venture Capitalists

Falconer Mitchell, Gavin Reid and Nicholas G Terry

CRIEFF Discussion Papers from Centre for Research into Industry, Enterprise, Finance and the Firm

Abstract: The key conecpts of principal-agent analysis are utilised to investigate influences on venture capitalists' accounting information requirements as used in their dealings with investees. The findings are based on structured interviews held with twenty leading venture capitalists, managing funds which together comprise over three quarters of all UK venure capital funds. The results confirm that a number of the key concepts of principal-agent analysis are mirrored in the financial communication process between venture capital investors and their investees. They reveal the venture capitalists' appreciation of the dangers of moral hazard and information asymmetry. It is shown that, as a consequence, their information demands are designed to provide safeguards through bonding arrangements. These establish and define an information flow which can be utilised as the basis for frequent and regular monitoring of the investee.

Keywords: agency analysis; venture capital; accounting information (search for similar items in EconPapers)
JEL-codes: D8 G2 M4 (search for similar items in EconPapers)
Date: 1994-10
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:san:crieff:9424

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