Perception of Risk by Venture Capital and Private Equity Firms: A European Perspective

We introduce and test an integrated model that links venture capitalist risk perceptions with the choice of governance measures. The sample consists of 104 European private equity funds. The results provide support for our proposed model and we identify several links between pre-contractual screening and post-contractual control mechanisms. We find that diligent pre-investment screening enhances the perceived effectiveness of post-investment control mechanism suggesting a number of behavioral implications for the venture capital fund manager and the entrepreneur.