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Agency Costs, Firm Value and Corporate Investment

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Title Agency Costs, Firm Value and Corporate Investment
Period 01 / 2008 - 09 / 2012
Status Completed
Dissertation Yes
Research number OND1333881
Data Supplier Website ERIM

Abstract

Venture capital is important in financing young start-up companies that do not have the size, assets and operating histories necessary to obtain capital from the more traditional sources such as banks and public capital markets. Private equity is important in financing companies in their later stages of development and financing buyouts. Not only being simply financiers, venture capitalists/private equity investors also actively participate in companies through their involvement in the management, strategic planning of their investee companies. In return for their services, they demand disproportionately higher ownership and control rights. The entrepreneur s personal attachment to the company may cause their reluctance to give up substantial shareholdings. On the other hand, lack of funds and experience in later development force them to relinquish some ownership. This project investigates entrepreneur s decision making in the tradeoff between value and costs of venture capital/private equity financing by conducting an experiment. Nowadays, venture capitalists, hedge funds and private equity investors also play a key role in disciplining managers of listed companies via shareholder activism and financing takeover bids. This project investigates the wealth effects associated with shareholder activism by venture capitalists/private equity investors/hedge funds. At the same time, venture capitalists/private equity investors are often looking to partner with management when financing a going private transaction where the company is taken off the stock market. This project examines which US companies are taken private with the help of private equity investors and how the characteristics and the performance of these companies after going private differ from companies that are taken private without the backing of a private equity investor.

Abstract (NL)

Het opsplitsen van bedrijfseigendom en bedrijfsmanagement is een van de hoofdoorzaken van ineffici├źnte kapitaaldistributie, stelt Manuel Vasconcelos in zijn proefschrift Agency Kosten, Ondernemingswaarde, en Bedrijfsinvesteringen (Agency Costs, Firm Value, and Corporate Investment). Hij gaat in op mechanismen die de invloed van marktfricties als 'agency kosten en informatieverschillen verkleinen, voor een hogere bedrijfswaarde en economische groei. Agency kosten hangen samen met het beter ge├»nformeerd zijn van managers in vergelijking met eigenaren. Deze kosten worden veroorzaakt doordat managers te weinig prikkels krijgen om in het belang van de eigenaar te handelen. Vasconcelos stelt dat de waarde van het bedrijf in deze gevallen omlaag gaat en dat het bestaan van deze kosten invloed heeft op de investeringsbeslissingen van de firma. Hij stelt dat het van groot belang is te begrijpen hoe deze invloed kan worden beperkt door middel van mechanismen zoals vrijwillige mededelingen of controle door institutionele aandeelhouders. Volgens Vasconcelos helpen deze mechanismen bij het beperken van agency kosten, en kunnen ze daardoor van invloed zijn op de waarde van het bedrijf.

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Classification

A53000 Banking and insurance business
D43000 Economics

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