Venture capital exit rights

Arbeitspapier

Theorists argue that exit rights can mitigate hold-up problems in venture capital. Using a hand-collected data-set of venture capital contracts from Germany we show that exit rights are included more frequently in venture capital contracts when a hold-up problem associated with the venture capitalist's exit decision is likely. Examples include drag-along and tag-along rights. Additionally, we find that almost all exit rights are allocated to the venture capitalist rather than to the entrepreneur. In addition, we show that besides the basic hold-up mechanism there are other mechanisms such as ex-ante bargaining power and the degree of pledgeable income that drive the allocation of exit rights.

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• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CFS Working Paper ; No. 2009/05

Classification and Topics

• Classification: Wirtschaft ; Investment Banking; Venture Capital; Brokerage; Ratings and Ratings Agencies ; Mergers; Acquisitions; Restructuring; Voting; Proxy Contests; Corporate Governance ; Information, Knowledge, and Uncertainty: General
• Subject: Venture Capital ; Corporate Governance ; Empirical Contract Theory ; Hold-up ; Exit Rights ; Trade-sale Rights ; Risikokapital ; Liquidation ; Vertrag ; Sunk Costs ; Corporate Governance ; Deutschland

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Bienz, Carsten ; Walz, Uwe
• Event: Veröffentlichung
• (who): Goethe University Frankfurt, Center for Financial Studies (CFS)
• (where): Frankfurt a. M.
• (when): 2008

Further information

• Handle: http://hdl.handle.net/10419/43232
• URN: urn:nbn:de:hebis:30-63764