Double Moral Hazard Between Venture Capital Firms and Entrepreneurs

• Main Authors: Wen-Tsung Tseng, 曾文聰
• Other Authors: Victor W. Liu
• Format: Others
• Language: zh-TW
• Published: 2003
• Online Access: http://ndltd.ncl.edu.tw/handle/97059731692181817270

碩士 === 國立中山大學 === 企業管理學系研究所 === 91 === The literatures on venture financing mainly focus on proposing resolutions of entrepreneurial moral hazard. However, those researches ignore the fact that venture capital firms might behave opportunistically as well. Hence, this paper offers an effective mechanism to resolve the double moral hazard raised between venture capital firms and entrepreneurs. Three main conclusions are drawn as follow: It is shown that although convertible preferred stock could prevent venture capital firms from opportunistic behavior, it has poor efficiency in dealing with entrepreneurial moral hazard. On the other hand, staged financing, as opposed to convertible preferred stock, could effectively mitigate entrepreneurial moral hazard, but hardly avert from moral hazard raised from venture capital firms. In its conclusion, this study illustrates that both convertible preferred stock and staged financing act as an effective complementary mechanism for each other. Compared with any single approach, this joint mechanism could relatively resolve a certain extent of double moral hazard.