A Control Theory of Venture Capital Finance

Erik Berglof

The Journal of Law, Economics, and Organization, 1994, vol. 10, issue 2, 247-67

Abstract: This article analyzes how an entrepreneur and an external investor allocate revenues and control among themselves in a venture capital relationship, given that they want to liquidate their holdings in the future. Within an incomplete contracting framework we generate contractual arrangements that closely resemble those observed in venture capital markets. In particular, we explain the predominance of preferred stock and convertible instruments. Copyright 1994 by Oxford University Press.

Date: 1994
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Persistent link: https://EconPapers.repec.org/RePEc:oup:jleorg:v:10:y:1994:i:2:p:247-67

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