 Investment stage drifts and venture capital managerial incentivesLuigi Buzzacchi, Giuseppe Scellato and Elisa Ughetto Journal of Corporate Finance, 2015, vol. 33, issue C, 118-128 Abstract: This paper investigates VC investment stage drifts as explained by the outcomes of managerial incentive schemes under different financial market conditions and past return performances. We exploit a unique dataset containing data for all of the venture capital funds in Europe that received financial support from the European Investment Fund (EIF) during the years 1998–2007. The dataset includes 149 VC funds that invested in 1925 companies. We find that a higher hurdle rate produces a compensation incentive that discourages VC managers from lowering funds' risk. We also observe that more reputable fund managers are less likely to increase risk by downward stage drifting and more likely to play it safe by following upward stage drifting strategies. Finally, managers of funds with a poor past performance appear to be less keen to perform stage drifts towards less risky stages, relative to well-performing fund managers. The latter evidence is more significant in periods of bull financial markets. Keywords: Venture capital funds; Investment style drift; Managerial incentives (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:corfin:v:33:y:2015:i:c:p:118-128 DOI: 10.1016/j.jcorpfin.2015.05.006 Access Statistics for this article Journal of Corporate Finance is currently edited by A. Poulsen and J. Netter More articles in Journal of Corporate Finance from Elsevier |
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