Venture capital exit rights

Carsten Bienz and Uwe Walz ()

No 2009/05, CFS Working Paper Series from Center for Financial Studies (CFS)

Abstract: Theorists argue that exit rights can mitigate hold-up problems in venture capital. Using a hand-collected data-set of venture capital contracts from Germany we show that exit rights are included more frequently in venture capital contracts when a hold-up problem associated with the venture capitalist's exit decision is likely. Examples include drag-along and tag-along rights. Additionally, we find that almost all exit rights are allocated to the venture capitalist rather than to the entrepreneur. In addition, we show that besides the basic hold-up mechanism there are other mechanisms such as ex-ante bargaining power and the degree of pledgeable income that drive the allocation of exit rights.

Keywords: Venture Capital; Corporate Governance; Empirical Contract Theory; Hold-up; Exit Rights; Trade-sale Rights (search for similar items in EconPapers)
JEL-codes: D80 G24 G34 (search for similar items in EconPapers)
Date: 2008
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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https://www.econstor.eu/bitstream/10419/43232/1/606212019.pdf (application/pdf)

Related works:
Journal Article: Venture Capital Exit Rights (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:cfswop:200905

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