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Managing financial risk and uncertainty: The case of venture capital and buy‐out funds
Author(s) -
Kut Can,
Pramborg Bengt,
Smolarski Jan
Publication year - 2007
Publication title -
global business and organizational excellence
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.227
H-Index - 16
eISSN - 1932-2062
pISSN - 1932-2054
DOI - 10.1002/joe.20132
Subject(s) - venture capital , finance , business , private equity , global assets under management , fund of funds , private equity fund , private equity firm , social venture capital , equity (law) , institutional investor , corporate governance , market liquidity , political science , law
To be successful in the private equity industry, funds must manage the many aspects of risk that are associated with venture capital and buy‐out investing. This study provides survey evidence of a wide range of risk management practices among 142 European funds in the private equity industry. The authors classify funds based on whether they are primarily involved in early‐stage financing (venture capital funds) or primarily later‐stage financing (buy‐out funds), and then analyze the effects of fund type along several dimensions of risk. The results show differences in how venture and buy‐out funds manage risk, which is most developed when evaluating new investments. Post‐investment risk practices are less developed. © 2007 Wiley Periodicals, Inc.