Abstract

http://ssrn.com/abstract=1240844
 
 

References (48)



 
 

Citations (16)



 


 



Investor Abilities and Financial Contracting: Evidence from Venture Capital


Ola Bengtsson


Lund University School of Economics and Management; Research Institute of Industrial Economics (IFN)

Berk A. Sensoy


Ohio State University - Fisher College of Business

January 29, 2011

Fisher College of Business Working Paper No. 2009-03-022
Dice Center Working Paper No. 2009-22
Journal of Financial Intermediation, Forthcoming

Abstract:     
Using a large, new database of contractual provisions governing the allocation of cash flow rights in venture capital (VC) financings, we investigate how contract design is related to VC abilities to monitor and provide value-added services to the entrepreneur. We find that more experienced VCs, who have superior abilities and more frequently join the boards of their portfolio companies, obtain weaker downside-protecting contractual cash flow rights than less experienced VCs. Several pieces of evidence suggest that this relation is unlikely to be driven by selection effects. The results suggest that VCs with better governance abilities focus less on obtaining downside protections, which entail risk-sharing costs, and more on other aspects of the contract (such as obtaining board representation) during negotiations with entrepreneurs. The results also imply that previous estimates of the amount entrepreneurs pay for affiliation with high-quality VCs are overstated.

Number of Pages in PDF File: 47

Keywords: Venture capital, Financial Contracting, Entrepreneur, Agency

JEL Classification: G24, G32

Accepted Paper Series





Download This Paper

Date posted: August 21, 2008 ; Last revised: October 29, 2014

Suggested Citation

Bengtsson, Ola and Sensoy, Berk A., Investor Abilities and Financial Contracting: Evidence from Venture Capital (January 29, 2011). Dice Center Working Paper No. 2009-22; Journal of Financial Intermediation, Forthcoming. Available at SSRN: http://ssrn.com/abstract=1240844

Contact Information

Ola Bengtsson
Lund University School of Economics and Management ( email )
P.O Box 7080
Lund
Sweden
HOME PAGE: http://www.olabengtsson.com
Research Institute of Industrial Economics (IFN) ( email )
Box 55665
Grevgatan 34, 2nd floor
Stockholm, SE-102 15
Sweden
Berk A. Sensoy (Contact Author)
Ohio State University - Fisher College of Business ( email )
2100 Neil Avenue
Columbus, OH 43210-1144
United States

Feedback to SSRN


Paper statistics
Abstract Views: 1,583
Downloads: 365
Download Rank: 46,964
References:  48
Citations:  16
Paper comments
No comments have been made on this paper

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo3 in 0.438 seconds