Financial Contracting
49 Pages Posted: 8 May 2001
There are 3 versions of this paper
Financial Contracting
Financial Contracting
Date Written: April 2001
Abstract
This paper discusses how economists' views of firms' financial structure decisions have evolved from treating firms' profitability as given; to acknowledging that managerial actions affect profitability; to recognizing that firm value depends on the allocation of decision or control rights. The paper argues that the decision or control rights approach is useful, even though it is at an early stage of development, and that the approach has some empirical content: it can throw light on the structure of venture capital contracts and the reasons for the diversity of claims.
Keywords: Financial contracting, decision rights, control rights
JEL Classification: D2, G3, L2
Suggested Citation: Suggested Citation
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