Evaluation frequency and evaluator’s experience: the case of venture capital investment firms and monitoring intensity in stage financing

Christian Hopp () and Christian Lukas

Journal of Management & Governance, 2014, vol. 18, issue 2, 649-674

Abstract: In this paper we analyze the relation between an investor’s experience and the intensity of monitoring activities. Specifically, we consider venture capitalist firms and their choices of time intervals between financing rounds. We hypothesize that more industry investment experience leads to longer time intervals between financing rounds and hence, lower monitoring intensity. Using a unique data set of venture capital firms from Germany during the period from 1995 to 2005 we find evidence for our hypothesis that in a given time frame more experienced investors evaluate and monitor their investments less often than less experienced investors. In addition, VC investors pool their experience and share the risk involved in investing by forming syndicates which reduces the incentives to monitor subsequently. On the basis of our results we argue that the optimal frequency of performance evaluations should take into account the experience of the evaluator. Copyright Springer Science+Business Media New York 2014

Keywords: Experience; Investment evaluation; Evaluation frequency; Monitoring; Governance; Venture capital (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (3)

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DOI: 10.1007/s10997-012-9231-8

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