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Mitigating agency risk between investors and ventures’ managers

Bellavitis, C., Kamuriwo, D. S. and Hommel, U. (2017). Mitigating agency risk between investors and ventures’ managers. Journal of General Management, 43(1), pp. 33-43. doi: 10.1177/0306307017722937

Abstract

The general management literature has long focused on the agency risks involved in the relationship between general managers and shareholders. Shareholders can deploy contractual and non-contractual mechanisms to reduce these inefficiencies. This study examines - based on a broad international sample of investment contracts - how the use of contractual and non-contractual mechanisms is related to the degree of risks associated with the venture’s development stage as well as how these practices differ across countries. Hypotheses are tested using a proprietary dataset of 265 hand-collected investment contracts associated with ventures in the U.S., Israel and nine European countries. Findings suggest that the use of mitigating contractual and non-contractual mechanisms is related to the degree of agency risks, and that these practices vary across countries. This study draws implications for how investors can best deploy their capital in different institutional settings whilst nurturing their relationships with managers and entrepreneurs.

Publication Type: Article
Additional Information: Bellavitis, C., Kamuriwo, D. S. & Hommel, U., Mitigating agency risk between investors and ventures’ managers. Journal of General Management, 43(1), pp. 33-43., Copyright © 2017 Sage. Reprinted by permission of SAGE Publications.
Publisher Keywords: agency theory, agency risks, moral hazard, adverse selection, investment contracts
Subjects: H Social Sciences > HD Industries. Land use. Labor > HD61 Risk Management
Departments: Cass Business School > Management
URI: http://openaccess.city.ac.uk/id/eprint/18062
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