Financial Contracting

49 Pages Posted: 8 May 2001

See all articles by Oliver Hart

Oliver Hart

Harvard University - Department of Economics; National Bureau of Economic Research (NBER); European Corporate Governance Institute (ECGI)

Multiple version iconThere are 3 versions of this paper

Date Written: April 2001


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

Hart, Oliver D., Financial Contracting (April 2001). Available at SSRN: or

Oliver D. Hart (Contact Author)

Harvard University - Department of Economics ( email )

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European Corporate Governance Institute (ECGI) ( email )

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