Stage Financing and the Role of Convertible Debt
AbstractWe have argued that convertible debt can be better than a simple mixture of debt and equity in stage financing situations. When the venture capitalist retains the option to abandon the project if in the medium term he receives a negative signal, the entrepreneur has an incentive to engage in "window dressing" or short-termism , i.e. to bias the signal towards positive values, in order to reduce the probability that the project will be liquidated.
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Bibliographic InfoPaper provided by Tel Aviv in its series Papers with number 23-97.
Length: 36 pages
Date of creation: 1997
Date of revision:
Contact details of provider:
Postal: Israel TEL-AVIV UNIVERSITY, THE FOERDER INSTITUTE FOR ECONOMIC RESEARCH, RAMAT AVIV 69 978 TEL AVIV ISRAEL.
Web page: http://econ.tau.ac.il/research/foerder.asp
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FINANCIAL MARKET ; DEBT ; ENTERPRISES;
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- G30 - Financial Economics - - Corporate Finance and Governance - - - General
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