Ch22.docx - Ch 22 Valuation Returns and Disclosure 2002...

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Ch 22 Valuation, Returns and Disclosure 2002 CALPERS disclosure lawsuit Public pension funds must disclose venture capital and private equity returns, even on unexited investments Implications for understanding determinants of, and reporting of, returns Do we need mandated disclosure standards for VC and PE funds? Biggest issue for VC/PE markets since collapse of Internet bubble Regulation of VC and PE funds one of the biggest issues in UK Financial Times last week Theory and hypothesis: 1. Advice, Monitoring & Returns Monitoring/advice activities of VC are responsible for return of VC Main focus on VC characteristic Model with asymmetric information Advice is not contractible IRR must be sufficiently large to induce VC to undertake optimal level of advice/monitoring The more productive the VC is, the higher the optimal advice/monitoring level  the lower the price of shares for the VC  the higher the VC returns
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