Economics at your fingertips  

Venture Capitalists Versus Angels: The Dynamics of Private Firm Financing Contracts

Thomas Chemmanur and Zhaohui Chen

Review of Corporate Finance Studies, 2014, vol. 3, issue 1-2, 39-86

Abstract: An entrepreneur, with private information about his firm, contracts over two periods with an outside financier, a venture capitalist (VC) or angel. The financier can reduce his information disadvantage by learning about the firm over time. VC financing is scarce relative to angel financing. Further, unlike an angel, a VC may exert effort, which, together with the entrepreneur’s effort, increases the firm’s success probability. The equilibrium VC financing contract ensures optimal effort-exertion by both entrepreneur and VC. We characterize the firm’s equilibrium choice between VC and angel financing, its equilibrium contractual provisions, and the dynamic evolution of its financing contract.

JEL-codes: G24 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (18) Track citations by RSS feed

Downloads: (external link) (application/pdf)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Access Statistics for this article

Review of Corporate Finance Studies is currently edited by Andrew Ellul

More articles in Review of Corporate Finance Studies from Oxford University Press
Bibliographic data for series maintained by Oxford University Press ().

Page updated 2023-05-18
Handle: RePEc:oup:rcorpf:v:3:y:2014:i:1-2:p:39-86.