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Financial Contracting Theory Meets the Real World: An Empirical Analysis of Venture Capital Contracts

Steven Kaplan () and Per Stromberg ()

Review of Economic Studies, 2003, vol. 70, issue 2, 281-315

Abstract: We compare the characteristics of real-world financial contracts to their counterparts in financial contracting theory. We do so by studying the actual contracts between venture capitalists (VCs) and entrepreneurs. The distinguishing characteristic of VC financings is that they allow VCs to separately allocate cash flow rights, board rights, voting rights, liquidation rights, and other control rights. We describe and measure these rights. We then interpret our results in relation to existing financial contracting theories. We also describe the interrelation and the evolution across financing rounds of the different rights. Copyright 2003, Wiley-Blackwell.

Date: 2003
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Related works:
Working Paper: Financial Contracting Theory Meets The Real World: An Empirical Analysis Of Venture Capital Contracts (2000) Downloads
Working Paper: Financial Contracting Theory Meets the Real World: An Empirical Analysis of Venture Capital Contracts (2000) Downloads
Working Paper: Financial Contracting Theory Meets the Real World: An Empirical Analysis of Venture Capital Contracts (2000) Downloads
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