Abstract
Investors face, in addition to the adverse selection, the moral hazard when the entrepreneur’s effort is not directly observable. The moral hazard exists in that the entrepreneur might not provide a desired level of effort and not choose the tasks that maximize the investor’s return. Investors minimize losses from the moral hazard by incentivizing and monitoring the entrepreneur, and through their active and supportive involvement with the venture.
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© 2014 Chandra S. Mishra and Ramona K. Zachary
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Mishra, C.S., Zachary, R.K. (2014). Moral Hazard, Entrepreneurial Incentives, and Risk Mitigation. In: The Theory of Entrepreneurship. Palgrave Macmillan, New York. https://doi.org/10.1057/9781137371461_7
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DOI: https://doi.org/10.1057/9781137371461_7
Publisher Name: Palgrave Macmillan, New York
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