40 Pages Posted: 12 Jan 2004
Date Written: December 2003
We analyse venture capital (VC) investments in 23 non-US countries and compare them to VC investments in the US. 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 US-style contracts regardless of legal regime. In most specifications, legal regime becomes insignificant controlling for VC sophistication. VCs who use US-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.
JEL Classification: G24, G32
Suggested Citation: Suggested Citation
Kaplan, Steven N. and Martel, Frederic and Strömberg, Per, How Do Legal Differences and Learning Affect Financial Contracts? (December 2003). CEPR Discussion Paper No. 4161. Available at SSRN: https://ssrn.com/abstract=487044
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