Arbeitspapier

Conditional Allocation of Control Rights in Venture Capital Finance

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.

Language
Englisch

Bibliographic citation
Series: Munich Discussion Paper ; No. 2006-13

Classification
Wirtschaft
Organizational Behavior; Transaction Costs; Property Rights
Investment Banking; Venture Capital; Brokerage; Ratings and Ratings Agencies
Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
Subject
Corporate Finance
Venture Capital
Control Rights
Convertible Securities

Event
Geistige Schöpfung
(who)
Gebhardt, Georg
Schmidt, Klaus M.
Event
Veröffentlichung
(who)
Ludwig-Maximilians-Universität München, Volkswirtschaftliche Fakultät
(where)
München
(when)
2006

DOI
doi:10.5282/ubm/epub.909
Handle
URN
urn:nbn:de:bvb:19-epub-909-1
Last update
10.03.2025, 11:43 AM CET

Data provider

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Object type

  • Arbeitspapier

Associated

  • Gebhardt, Georg
  • Schmidt, Klaus M.
  • Ludwig-Maximilians-Universität München, Volkswirtschaftliche Fakultät

Time of origin

  • 2006

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