Agency and information problems in venture capital markets: an empirical study of the information needs of U.K. investors and the demand for accounting information.

Hassan, Abeer E. and Leece, David (2007) Agency and information problems in venture capital markets: an empirical study of the information needs of U.K. investors and the demand for accounting information. Journal of private equity, 10 (2). pp. 93-112. ISSN 1096-5572

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Abstract

Venture capital firms face information deficits, asymmetric information and agency problems with respect to their proposed investee companies. This paper considers differences in the approaches and methods used by venture capital firms to overcome these market imperfections and value unquoted companies. The research looks for statistically significant differences in the valuation behaviour of different types of venture capital firms and assesses the relative importance and use of independent accounting information. The results suggest the overall importance of information deficits and agency problems and the extent to which they vary by organisational structure, funding and different stages of investment.