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The risk of adverse selection and its management in the process of venture capital investment (The experience of Hungarian investors)

Lovas, Anita (2015) The risk of adverse selection and its management in the process of venture capital investment (The experience of Hungarian investors). Economy and Finance, 2 (2). pp. 186-202.

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Abstract

Venture capitalists can be regarded as financers of young, high-risk enterprises, seeking investments with a high growth potential and offering professional support above and beyond their capital investment. The aim of this study is to analyse the occurrence of information asymmetry between venture capital investors and entrepreneurs, with special regard to the problem of adverse selection. In the course of my empirical research, I conducted in-depth interviews with 10 venture capital investors. The aim of the research was to elicit their opinions about the situation regarding information asymmetry, how they deal with problems arising from adverse selection, and what measures they take to manage these within the investment process. In the interviews we also touched upon how investors evaluate state intervention, and how much they believe company managers are influenced by state support.

Item Type:Article
Uncontrolled Keywords:venture capital, decision-making process, innovation, adverse selection
JEL classification:D81 - Information, Knowledge, and Uncertainty: Criteria for Decision-Making under Risk and Uncertainty
D83 - Information, Knowledge, and Uncertainty: Search - Learning - Information and Knowledge - Communication - Belief
G24 - Investment Banking; Venture Capital; Brokerage; Ratings and Ratings Agencies
Subjects:Knowledge economy, innovation
Finance
ID Code:2070
Deposited By: Ádám Hoffmann
Deposited On:24 Sep 2015 13:05
Last Modified:24 Sep 2015 13:05

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