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A Study of a Venture Company’s Control Rights Allocation Model

Author

Listed:
  • Hiromi Sakakibara
  • Shuichi Ishida
  • Takashi Natori
  • Nobuaki Minato

Abstract

This paper proposes an allocation model of control rights between entrepreneurs and investors to properly manage venture companies. The basic concept of this model involves reflecting the company’s future market value in its control rights to entrepreneurs as an incentive, while securing investors’ minimum monetary requirements. Previous studies reveal that entrepreneurs’ control rights gradually dilute as the monetary requirement increases in multi-staged financing; therefore, it is necessary to establish a fundamental rule for control rights allocations in initial contracts. This model also has the capability to allocate cash flow rights, and the potential capability to justify its premium.

Suggested Citation

  • Hiromi Sakakibara & Shuichi Ishida & Takashi Natori & Nobuaki Minato, 2018. "A Study of a Venture Company’s Control Rights Allocation Model," Asian Social Science, Canadian Center of Science and Education, vol. 14(1), pages 160-160, January.
    • Handle: RePEc:ibn:assjnl:v:14:y:2018:i:1:p:160
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    References listed on IDEAS

    as
    1. Tsjalle van der Burg & Aloys Prinz, 2010. "Empowering Firm Owners by Separating Voting from Buying and Selling Shares," Review of Social Economy, Taylor & Francis Journals, vol. 68(1), pages 69-91.
    2. Philippe Aghion & Patrick Bolton, 1992. "An Incomplete Contracts Approach to Financial Contracting," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 59(3), pages 473-494.
    3. Enya He & David W. Sommer, 2010. "Separation of Ownership and Control: Implications for Board Composition," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 77(2), pages 265-295, June.
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    More about this item

    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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