Start-Up Finance, Monitoring, and Collusion
AbstractI examine optimal financial contracts between entrepreneurs, financial intermediaries (venture capitalists), and other investors that allocate both cash flow rights and control rights to (i) motivate the venture capitalist to efficiently monitor the entrepreneur, (ii) ensure that the efficient decision is made at the interim stage concerning project continuation and refinancing, and (iii) deter collusion between the entrepreneur and the venture capitalist at the expense of the other investors. The combination of asymmetric information at the interim stage with the possibility of collusion yields optimal (collusion-proof) contracts that are consistent with several commonly observed characteristics of venture capital financing.
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Bibliographic InfoArticle provided by The RAND Corporation in its journal RAND Journal of Economics.
Volume (Year): 36 (2005)
Issue (Month): 2 (Summer)
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- Thierry Tressel & Thierry Verdier, 2007.
"Financial Globalization and the Governance of Domestic Financial Intermediaries,"
IMF Working Papers
07/47, International Monetary Fund.
- Thierry Tressel & Thierry Verdier, 2011. "Financial Globalization and the Governance of Domestic Financial Intermediaries," Journal of the European Economic Association, European Economic Association, vol. 9(1), pages 130-175, 02.
- Caselli, Stefano & Garcia-Appendini, Emilia & Ippolito, Filippo, 2013. "Contracts and returns in private equity investments," Journal of Financial Intermediation, Elsevier, vol. 22(2), pages 201-217.
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