Firm-specific Risk Information Specific Risk 
Reynolds Holding
FEBRUARY 12, 2023
Founders may be reluctant to take on so much risk. Founders typically invest a large percentage of their human and financial capital into their startups and consequently are unable to diversify firm-specific risk. In our model, VCs address the divergence in risk preference by striking an implicit bargain with founders.
Reynolds Holding
JULY 5, 2022
Moreover, large companies typically have deep pockets, which ensures compensation for investors who incurred losses because they traded during the period when stock prices were distorted by false information. Sometimes they are represented on the board, which provides them with direct decision-making powers and access to information.
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