(Wht Happ)The incentives and the intended roles of players in the investing and informationchain and the regulators were substantially misaligned thus causing a breakdown inthe effective and well functioning capital market.How incentives side tracked rational decision ---------------------------I.
Venture Capitalists:
•
To provide high rate of return to their investors, VC’s typically sold their stake in their portfolio companies either to the public through an IPO, or toanother company in a trade sale.
•
The partners in a VC firm typically had a substantially percentage of their net worth tied in their funds, which aligned their interests with their investors.
•
The main form of compensation was large share of profits (typically 20%).
•
II.Investment Bank Underwriters

III.Sell-Side Analysts:
•
IV. Buy-Side Analysts and Portfolio Managers:
•
V.Accountants and Auditors:
•
VI.The Regulator – FASB:
•
Whose incentive is most misaligned

(Wht Happ)The incentives and the intended roles of players in the investing and informationchain and the regulators were substantially misaligned thus causing a breakdown inthe effective and well functioning capital market.How incentives side tracked rational decision ---------------------------I.
Venture Capitalists:
•
To provide high rate of return to their investors, VC’s typically sold their stake in their portfolio companies either to the public through an IPO, or toanother company in a trade sale.
•
The partners in a VC firm typically had a substantially percentage of their net worth tied in their funds, which aligned their interests with their investors.
•
The main form of compensation was large share of profits (typically 20%).
•
II.Investment Bank Underwriters

III.Sell-Side Analysts:
•
IV. Buy-Side Analysts and Portfolio Managers:
•
V.Accountants and Auditors:
•
VI.The