Professional Documents
Culture Documents
Usefulness:
• For the borrowers: Ensure a stability in financial performance and trust
• For the lender: Security (Collateral), Control over the lending situation, Right to call off
an entire agreement in case of breach
Hypotheses
H1: Negotiating and monitoring specific covenants is costly; contracting parties weigh the
potential costs and benefits of a particular covenant.
H2: Utilization of covenants to variation supply and demand: In the short run, the supply of
venture capital is usually fixed, with a modest number of venture partnerships raising a
carefully limited size each year. With the developing startup ecosystem in the past 15 years,
demand for VC has increased. Covenants can ensure the rightful fees paid to Venture
capitalists, and restrictions on activities of the venture capitalists at their investors' expense
may be lifted.
The Venture Capital Industry
The single most important factor accounting for the increase in money flowing into the venture capital sector was the 1979
amendment to the "prudent man" rule governing pension fund investments. Prior to that date, the Employee Retirement Income
Security Act of 1974 prohibited pension funds from investing substantial amounts of money in venture capital or other high-risk
asset classes
Title and Content Layout with Chart
0
Category 1 Category 2 Category 3 Category 4
Class 3 84 90
Title and Content Layout with SmartArt
Task Task
description description
Task
description
Picture with Caption Layout
Caption
ADD A SLIDE TITLE - 1
ADD A SLIDE TITLE - 2
Add a Slide Title - 3
Add a Slide Title - 4
Add a Slide Title - 5