Financing entrepreneurs: optimal contracts and the role of intermediaries

Roberta Dessi

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: I study an economy in which entrepreneurs seek financing for longterm projects from capital-constrained intermediaries, who specialise in monitoring, and uninformed investors. Monitoring enables an intermediary to affect investment decisions, and may confer an informational advantage at the interim stage. Optimal financial contracts are designed to induce both ex ante (choice of investment project) and ex post (decision to continue or liquidate at the interim stage) efficiency, while economising on the use of scarce intermediary capital. Under certain assumptions, a degree of asymmetric information at the interim stage (between informed insiders and uninformed outside investors) makes it possible to improve on contracting possibilities for the symmetric information case. The paper identifies circumstances in which "venture capital" contracts are optimal.

JEL-codes: G00 (search for similar items in EconPapers)
Pages: 27 pages
Date: 1999-06-01
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://eprints.lse.ac.uk/119120/ Open access version. (application/pdf)

Related works:
Working Paper: Financing Entrepreneurs: Optimal Contracts and the Role of Intermediaries (1999)
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: https://EconPapers.repec.org/RePEc:ehl:lserod:119120

Access Statistics for this paper

More papers in LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library LSE Library Portugal Street London, WC2A 2HD, U.K.. Contact information at EDIRC.
Bibliographic data for series maintained by LSERO Manager ().