The Dynamics of Venture Capital Contracts

CFS Working Paper No. 2006/11

44 Pages Posted: 28 Feb 2005

See all articles by Carsten Bienz

Carsten Bienz

Norwegian School of Economics (NHH)

Julia Hirsch

Universidad Autónoma de Querétaro

Multiple version iconThere are 2 versions of this paper

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

Bienz, Carsten and Hirsch, Julia, The Dynamics of Venture Capital Contracts (2006). CFS Working Paper No. 2006/11, Available at SSRN: https://ssrn.com/abstract=929491 or http://dx.doi.org/10.2139/ssrn.929491

Carsten Bienz (Contact Author)

Norwegian School of Economics (NHH) ( email )

Helleveien 30
Bergen
Norway

Julia Hirsch

Universidad Autónoma de Querétaro ( email )

Cerro de las Campanas S/N, Las Campanas
Queretaro, 76010
Mexico

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