Entrepreneurial Financing, Advice, and Agency Costs
"We develop a model to study the interplay between advice and agency costs in entrepreneurial financing. We demonstrate a tension between the entrepreneur's motivation for effort and the investor's willingness to finance the project. Advice to the entrepreneur exacerbates this tension. Consequently, optimal financing contracts may involve full, partial, or no advice. With partial advice, information flows need to be controlled carefully. Such control is better when advice and finance are integrated as observed by venture capitalists." Copyright (c) 2009, The Author(s) Journal Compilation (c) 2009 Wiley Periodicals, Inc..
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Volume (Year): 18 (2009)
Issue (Month): 3 (09)
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- Klaus M. Schmidt, 2003.
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- Admati, Anat R & Pfleiderer, Paul, 1994. " Robust Financial Contracting and the Role of Venture Capitalists," Journal of Finance, American Finance Association, vol. 49(2), pages 371-402, June.
- Jensen, Michael C. & Meckling, William H., 1976. "Theory of the firm: Managerial behavior, agency costs and ownership structure," Journal of Financial Economics, Elsevier, vol. 3(4), pages 305-360, October.
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