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Making Your Own Rules: Contractual Flexibility and Entrepreneurial Success

Author

Listed:
  • Paul Beaumont

    (McGill University = Université McGill [Montréal, Canada])

  • Adrien Matray

    (Princeton University)

  • Johan Hombert

    (HEC Paris - Ecole des Hautes Etudes Commerciales)

Abstract

Can reducing contracting costs between entrepreneurs and investors enhance entrepreneurial success? We assemble a novel dataset of company bylaws covering the near-universe of firms incorporated in France between 2004 and 2012. We show that many new firms, including non-VC-backed firms, tailor their bylaws by modifying default provisions on ownership and control rights, while cash-flow rights are less frequently customized. Such tailoring correlates with proxies for asymmetric information and entrepreneur sophistication. Exploiting a 2008 French reform that lowered the cost of bylaws customization, we show that increased contractual flexibility led to higher equity financing at creation and to persistent increases in investment, employment, and revenue growth.

Suggested Citation

  • Paul Beaumont & Adrien Matray & Johan Hombert, 2026. "Making Your Own Rules: Contractual Flexibility and Entrepreneurial Success," Working Papers hal-05688643, HAL.
    • Handle: RePEc:hal:wpaper:hal-05688643
    DOI: 10.2139/ssrn.6551658
    as

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