| Gebhardt, Georg and Schmidt, Klaus M. (2006): Conditional Allocation of Control Rights in Venture Capital Finance. Discussion Papers in Economics 2006-13 |
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242Kb |
Abstract
When a young entrepreneurial firm matures, it is often necessary to replace the founding entrepreneur by a professional manager. This replacement decision can be affected by the private benefits of control enjoyed by the entrepreneur which gives rise to a conflict of interest between the entrepreneur and the venture capitalist. We show that a combination of convertible securities and contingent control rights can be used to resolve this conflict efficiently. This contractual arrangement is frequently observed in venture capital finance.
| Item Type: | Paper (Discussion Paper) |
|---|---|
| Keywords: | Corporate Finance, Venture Capital, Control Rights, Convertible Securities |
| Collections: | Economics Economics > Discussion Papers in Economics Economics > Discussion Papers in Economics > Micro-Economics Economics > Discussion Papers in Economics > Financial Markets Economics > Discussion Papers in Economics > Institutional Economics Economics > Discussion Papers in Economics > Game Theory |
| Subjects: | 300 Social sciences > 300 Social sciences, sociology and anthropology 300 Social sciences > 330 Economics |
| JEL Classification: | D23, G24, G32 |
| URN: | urn:nbn:de:bvb:19-epub-909-1 |
| Language: | English |
| ID Code: | 909 |
| Deposited On: | 28. Mar 2006 |
| Last Modified: | 25. May 2012 11:12 |
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