We conjecture that venture capitalists and their investors often fall prey to what is known as ?collective conservatism.? We investigate this conjecture by analyzing boilerplate provisions in limited partnership agreements.
When investors accept suboptimal boilerplate provisions it is not because they believe that the standardized terms and conditions sufficiently align the interests of investors and fund managers, but merely because they think their peers, including their competitors, prefer to include them in the limited partnership agreement. We find that the financial crisis has facilitated some notable deviations in the boilerplate provisions that are aimed at returning confidence in the venture capital industry. We argue that a gradual shift may be taking place towards more investor-favorable limited partnership agreements or separate accounts and pledge funds arrangements. These shifts - which do not lead to significant changes in the limited partnership agreements - appear to be particularly effective for bigger funds that increasingly focus on later stage investments. We show that early stage funds are more inclined to enter into innovative collaborative agreements. Collaborative agreements differ from the traditional limited partnership agreements in that they focus less on curtailing principal agent problems and more on joint development and value creation.
We use a unique dataset to examine the link between ESG disclosure and quality through a cross-country comparison of disclosure requirements and stewardship codes. We find a strong relationship between the extent of ESG disclosure and the quality...Read more
The last decade has challenged the paradigm of the hedge fund industry as a unique performer. We identify three main factors that have affected the operation of hedge funds: competition from mutual funds, the market environment, and tighter...Read more
We are witnessing a quiet but quick transformation of corporate governance. The rise of digital technologies and social media are forcing companies to reconsider how they organize themselves and structure firm governance.
What is...Read more
The stockholder/stakeholder dilemma has occupied corporate leaders and corporate lawyers for over a century. In addition to the question whose interests should managers prioritize, the question how those interests could or should be balanced has...Read more