The Dynamics of Venture Capital Contracts
CFS Working Paper No. 2006/11
44 Pages Posted: 28 Feb 2005
There are 2 versions of this paper
The Dynamics of Venture Capital Contracts
The Dynamics of Venture Capital Contracts
Date Written: 2006
Abstract
In this paper, we analyze staging and its different modes in venture capital contracts. We interpret staging as a conscious decision for the introduction of renegotiation. Thereby, the renegotiation process can be designed in different ways as seen by the choice between milestone and round financing. We use a hand-collected sample of 464 investment rounds into 290 entrepreneurial firms from German venture capital contracts and and that risk and differences in information increase the probability for staging, while the different modes of staging crucially depend upon the allocation of bargaining power and the information structure.
Keywords: Venture capital, staging, corporate governance, moral hazard, renegotiation, contract theory
JEL Classification: G24, G32, G34
Suggested Citation: Suggested Citation
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