Contracts and Exits in Venture Capital Finance
York University - Schulich School of Business
AFA 2003 Washington, DC Meetings
The Review of Financial Studies, Vol. 21, Issue 5, pp. 1947-1982, 2008
Using a sample of European venture capital investments, I study the relation between venture capital (VC) contracts and exits. The data indicate that ex ante, stronger VC control rights increase the likelihood that an entrepreneurial firm will exit by an acquisition, rather than through a write-off or an IPO. My findings are robust to controls for a variety of factors, including endogeneity and cases in which the VC preplans the exit at the time of time of contract choice. My findings are consistent with control-based theories of financial contracting, such as Aghion and Bolton (1992).
Number of Pages in PDF File: 39
Keywords: Venture Capital, Financial Contracting, Exit, IPO, Acquisition
JEL Classification: G24, G28, G31, G32, G35Accepted Paper Series
Date posted: March 22, 2002 ; Last revised: October 13, 2008
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