Taxation of a Venture Capitalist With a Portfolio of Firms
University of St. Gallen Department of Economics working paper series 2003 from Department of Economics, University of St. Gallen
Venture capitalists not only finance but also advise and thereby add value to young innovative firms. The prospects of venture capital backed firms thus depend on joint efforts of entrepreneurs and informed venture capitalists, and are subject to double moral hazard. In financing a portfolio of firms, venture capitalists additionally face a trade-off between the number of companies and the amount of managerial advice allocated to each individual venture. The paper argues that managerial support and the number of portfolio firms are inefficiently low in private equilibrium. An optimal tax policy is derived that succeeds to move the private equilibrium towards a first best allocation.
Keywords: Venture capital; double moral hazard; optimal taxation. (search for similar items in EconPapers)
JEL-codes: D82 G24 H21 H25 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cfn and nep-pub
References: Add references at CitEc
Citations View citations in EconPapers (1) Track citations by RSS feed
Downloads: (external link)
Journal Article: Taxation of a venture capitalist with a portfolio of firms (2004)
Working Paper: Taxation of a Venture Capitalist with a Portfolio of Firms (2002)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:usg:dp2003:2003-04
Access Statistics for this paper
More papers in University of St. Gallen Department of Economics working paper series 2003 from Department of Economics, University of St. Gallen Contact information at EDIRC.
Series data maintained by Joerg Baumberger ().