Conditional Allocation of Control Rights in Venture Capital Firms
When a young entrepreneurial firm matures, it is often necessary to replace the founding entrepreneur by a professional manager. This replacement decision can be affected by the private benefits of control enjoyed by the entrepreneur which gives rise to a conflict of interest between the entrepreneur and the venture capitalist. We show that a combination of convertible securities and contingent control rights can be used to resolve this conflict efficiently. This contractual arrangement is frequently observed in venture capital finance.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
|Date of creation:||Jul 2006|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: 44 - 20 - 7183 8801
Fax: 44 - 20 - 7183 8820
|Order Information:|| Email: |
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Repullo, Rafael & Suarez, Javier, 1999.
"Venture Capital Finance: A Security Design Approach,"
CEPR Discussion Papers
2097, C.E.P.R. Discussion Papers.
- Rafael Repullo & Javier Suarez, 2004. "Venture Capital Finance: A Security Design Approach," Review of Finance, Springer, vol. 8(1), pages 75-108.
- Repullo, R. & Suarez, J., 1998. "Venture Capital Finance: a Security Design Approach," Papers 9804, Centro de Estudios Monetarios Y Financieros-.
- Steven N. Kaplan & Per Stromberg, 2003.
"Financial Contracting Theory Meets the Real World: An Empirical Analysis of Venture Capital Contracts,"
Review of Economic Studies,
Wiley Blackwell, vol. 70(2), pages 281-315, 04.
- Steven N. Kaplan & Per Strömberg, 2000. "Financial Contracting Theory Meets the Real World: An Empirical Analysis of Venture Capital Contracts," CRSP working papers 513, Center for Research in Security Prices, Graduate School of Business, University of Chicago.
- Kaplan, Steven & Strömberg, Per Johan, 2000. "Financial Contracting Theory Meets The Real World: An Empirical Analysis Of Venture Capital Contracts," CEPR Discussion Papers 2421, C.E.P.R. Discussion Papers.
- Steven N. Kaplan & Per Stromberg, 2000. "Financial Contracting Theory Meets the Real World: An Empirical Analysis of Venture Capital Contracts," NBER Working Papers 7660, National Bureau of Economic Research, Inc.
- Colin Mayer & Koen Schoors & Yishay Yafeh, 2003.
"Sources of Funds and Investment Activities of Venture Capital Funds: Evidence from Germany, Israel, Japan and the UK,"
NBER Working Papers
9645, National Bureau of Economic Research, Inc.
- Mayer, Colin & Schoors, Koen & Yafeh, Yishay, 2002. "Sources of Funds and Investment Activities of Venture Capital Funds: Evidence from Germany, Israel, Japan and the UK," CEPR Discussion Papers 3340, C.E.P.R. Discussion Papers.
- Hellmann, Thomas F., 2002.
"IPOs, Acquisitions and the Use of Convertible Securities in Venture Capital,"
1702r, Stanford University, Graduate School of Business.
- Hellmann, Thomas, 2006. "IPOs, acquisitions, and the use of convertible securities in venture capital," Journal of Financial Economics, Elsevier, vol. 81(3), pages 649-679, September.
- Berglof, Erik, 1994. "A Control Theory of Venture Capital Finance," Journal of Law, Economics and Organization, Oxford University Press, vol. 10(2), pages 247-67, October.
- Klaus Schmidt, 1999.
"Convertible Securities and Venture Capital Finance,"
CESifo Working Paper Series
217, CESifo Group Munich.
- Klaus M. Schmidt, 2003. "Convertible Securities and Venture Capital Finance," Journal of Finance, American Finance Association, vol. 58(3), pages 1139-1166, 06.
- Schmidt, Klaus M., 1999. "Convertible Securities and Venture Capital Finance," CEPR Discussion Papers 2317, C.E.P.R. Discussion Papers.
- Schmidt, Klaus M., 2003. "Convertible Securities and Venture Capital Finance," Munich Reprints in Economics 19769, University of Munich, Department of Economics.
- Hannan, Michael T & Burton, M Diane & Baron, James N, 1996. "Inertia and Change in the Early Years: Employment Relations in Young, High Technology Firms," Industrial and Corporate Change, Oxford University Press, vol. 5(2), pages 503-36.
When requesting a correction, please mention this item's handle: RePEc:cpr:ceprdp:5758. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()The email address of this maintainer does not seem to be valid anymore. Please ask to update the entry or send us the correct address
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.