Venture Capital and Private Equity Contracting

Chapter 6. Compensation Contracts

6.1. Introduction and Learning Objectives

This chapter empirically investigates venture capital and private equity managerial compensation contracts. Managerial compensation is widely regarded as influential in mitigating agency costs and thus also influencing the performance of corporations (Bebchuk and Fried, 2004), governments (Fisman and Di Tella, 2004), mutual funds (Chevalier and Ellison, 1997, 1999a,b), and private investment funds (Cressy et al., 2007a,b; Dai, 2007; Gompers and Lerner, 1999a,b; Hege et al., 2006; Litvak, 2004a,b; Nikoskelainen and Wright, 2007; Renneboog et al., 2007; Schwienbacher, 2003).^[1] Here we focus on compensation contracts for managers of private equity funds. Using a new international ...