Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/97720
Authors: 
Inderst, Roman
Müller, Holger
Münnich, Felix
Year of Publication: 
2009
Series/Report no.: 
IMFS Working Paper Series 34
Abstract: 
This article shows that investors financing a portfolio of projects may use the depth of their financial pockets to overcome entrepreneurial incentive problems. Competition for scarce informed capital at the refinancing stage strengthens investors’ bargaining positions. And yet, entrepreneurs’ incentives may be improved, because projects funded by investors with ‘‘shallow pockets’’ must have not only a positive net present value at the refinancing stage, but one that is higher than that of competing portfolio projects. Our article may help understand provisions used in venture capital finance that limit a fund’s initial capital and make it difficult to add more capital once the initial venture capital fund is raised. (JEL G24, G31)
JEL: 
G24
G31
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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