Economics at your fingertips  

VC Funds: Aging Brings Myopia

Eugene Kandel (), Dima Leshchinskii and Harry Yuklea

Journal of Financial and Quantitative Analysis, 2011, vol. 46, issue 2, 431-457

Abstract: We study the conflict of interests between the limited partners (LPs) and the general partner (GP) in a venture capital (VC) fund with a limited life span. LPs commit money, while the GP selects and monitors projects. Midway into the project, the GP privately observes the project’s quality and the estimated time to exit. The fund’s limited time horizon and the GP’s informational advantage lead to inefficient decisions at this stage. First, the GP continues bad projects. Second, he may stop monitoring good, but delay-prone projects. We provide empirical predictions and illustrative evidence that the magnitude of the effect is significant.

Date: 2011
References: Add references at CitEc
Citations: View citations in EconPapers (19) Track citations by RSS feed

Downloads: (external link) ... type/journal_article link to article abstract page (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Access Statistics for this article

More articles in Journal of Financial and Quantitative Analysis from Cambridge University Press Cambridge University Press, UPH, Shaftesbury Road, Cambridge CB2 8BS UK.
Bibliographic data for series maintained by Keith Waters ().

Page updated 2021-04-01
Handle: RePEc:cup:jfinqa:v:46:y:2011:i:02:p:431-457_00