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Why do contracts differ between VC types? Market segmentation versus corporate governance varieties

  • Hirsch, Julia
  • Walz, Uwe
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    The main objective of the present paper is to disentangle observed differences in the design of contracts across VC types into firm selection effects and corporate governance differences between VC types (different contracts). Based on a theoretical approach developed in the first part of the paper, we investigate in the second part these issues empirically by using a unique, hand-collected German data set consisting of all contractual details of VC investments into 290 entrepreneurial firms in the period 1990-2004. By employing various matching procedures, we show that VC types differ in both firm choice and corporate governance approach.

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    File URL: http://econstor.eu/bitstream/10419/25478/1/515351458.PDF
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    Paper provided by Center for Financial Studies (CFS) in its series CFS Working Paper Series with number 2006/12.

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    Date of creation: 2006
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    Handle: RePEc:zbw:cfswop:200612
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    1. Hellmann, Thomas, 2002. "A theory of strategic venture investing," Journal of Financial Economics, Elsevier, vol. 64(2), pages 285-314, May.
    2. Bienz, Carsten & Hirsch, Julia, 2005. "The dynamics of venture capital contracts," CFS Working Paper Series 2006/11, Center for Financial Studies (CFS).
    3. Steven N. Kaplan & Per Str�mberg, 2003. "Financial Contracting Theory Meets the Real World: An Empirical Analysis of Venture Capital Contracts," Review of Economic Studies, Oxford University Press, vol. 70(2), pages 281-315.
    4. Kaplan, Steven & Strömberg, Per Johan, 2002. "Characteristics, Contracts and Actions: Evidence from Venture Capitalist Analyses," CEPR Discussion Papers 3243, C.E.P.R. Discussion Papers.
    5. 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.
    6. Markus Froelich, 2002. "Programme Evaluation with Multiple Treatments," University of St. Gallen Department of Economics working paper series 2002 2002-17, Department of Economics, University of St. Gallen.
    7. De bettignies, Jean-Etienne & Chemla, Gilles, 2003. "Corporate Venture Capital: The Upside of Failure and Competition for Talent," Economics Papers from University Paris Dauphine 123456789/6366, Paris Dauphine University.
    8. Riyanto, Yohanes E. & Schwienbacher, Armin, 2006. "The strategic use of corporate venture financing for securing demand," Journal of Banking & Finance, Elsevier, vol. 30(10), pages 2809-2833, October.
    9. Bascha, Andreas & Walz, Uwe, 2002. "Financing practices in the German venture capital industry: An empirical assessment," CFS Working Paper Series 2002/08, Center for Financial Studies (CFS).
    10. Catherine Casamatta, 2003. "Financing and Advising: Optimal Financial Contracts with Venture Capitalists," Journal of Finance, American Finance Association, vol. 58(5), pages 2059-2086, October.
    11. Oana Secrieru & Marianne Vigneault, 2004. "Public Venture Capital and Entrepreneurship," Working Papers 04-10, Bank of Canada.
    12. Tykvová, Tereza & Walz, Uwe, 2004. "Are IPOs of Different VCs Different?," ZEW Discussion Papers 04-32, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    13. Josh Lerner, 2002. "When Bureaucrats Meet Entrepreneurs: The Design of Effective "Public Venture Capital" Programmes," Economic Journal, Royal Economic Society, vol. 112(477), pages F73-F84, February.
    14. Uwe Walz & Carsten Bienz, 2006. "Evolution of Decision and Control Rights in Venture Capital Contracts: An Empirical Analysis," FMG Discussion Papers dp585, Financial Markets Group.
    15. Masako Ueda, 2004. "Banks versus Venture Capital: Project Evaluation, Screening, and Expropriation," Journal of Finance, American Finance Association, vol. 59(2), pages 601-621, 04.
    16. Siegel, Robin & Siegel, Eric & MacMillan, Ian C., 1988. "Corporate venture capitalists: Autonomy, obstacles, and performance," Journal of Business Venturing, Elsevier, vol. 3(3), pages 233-247.
    17. Michael Lechner, 2002. "Program Heterogeneity And Propensity Score Matching: An Application To The Evaluation Of Active Labor Market Policies," The Review of Economics and Statistics, MIT Press, vol. 84(2), pages 205-220, May.
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