Abstract

http://ssrn.com/abstract=468784
 
 

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How Do Legal Differences and Learning Affect Financial Contracts?


Steven N. Kaplan


University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER)

Frederic Martel


UBS Global Asset Management; University of Lausanne IMD

Per Strömberg


Swedish House of Finance

November 2003

NBER Working Paper No. w10097

Abstract:     
We analyze venture capital (VC) investments in twenty-three non-U.S. countries and compare them to VC investments in the U.S. We describe how the contracts allocate cash flow, board, liquidation, and other control rights. In univariate analyses, contracts differ across legal regimes. At the same time, however, more experienced VCs implement U.S.-style contracts regardless of legal regime. In most specifications, legal regime becomes insignificant controlling for VC sophistication. VCs who use U.S.-style contracts fail significantly less often. Financial contracting theories in the presence of fixed costs of learning, therefore, appear to explain contracts along a wide range of legal regimes.

Number of Pages in PDF File: 38

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Date posted: November 17, 2003  

Suggested Citation

Kaplan, Steven N. and Martel, Frederic and Strömberg, Per, How Do Legal Differences and Learning Affect Financial Contracts? (November 2003). NBER Working Paper No. w10097. Available at SSRN: http://ssrn.com/abstract=468784

Contact Information

Steven Neil Kaplan (Contact Author)
University of Chicago - Booth School of Business ( email )
5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
773-702-4513 (Phone)
773-702-0458 (Fax)
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Frederic Martel
UBS Global Asset Management ( email )
Zurich, CH-8098
Switzerland
+41 1 235 56 93 (Phone)
+41 1 235 55 90 (Fax)
University of Lausanne IMD
Lausanne, 1015
Switzerland
Per Stromberg
Swedish House of Finance ( email )
Drottninggatan 98
111 60 Stockholm
Sweden

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