Location Specific Styles and US Venture Capital Contracting

2015 ◽  
Vol 05 (03) ◽  
pp. 1550012 ◽  
Author(s):  
Ola Bengtsson ◽  
S. Abraham Ravid
Keyword(s):  
Venture Capital ◽  
Cash Flow ◽  
Ceo Compensation ◽  
Contract Design ◽  
Control Rights ◽  
Financial Contracts ◽  
Compensation Contracts ◽  
The Us

This paper shows that several contractual equilibria coexist in the US venture capital (VC) contracts. Our database is larger than that of previous studies and includes 1,804 contracts. Our main finding is that California-based entrepreneurs receive less harsh contract terms. In particular, investors subject to California-based or California style contracts have less downside protection. This “California effect” remains large and significant even after we include all the previously discovered controls which determine contract design. We find a similar effect if the VC is located in California, or if a non-California VC had a large exposure to the California market. We do not find evidence that VCs are substituting cash flow contingencies for control rights or for performance-based CEO compensation contracts. We also document several other new contractual features of VC contracts. In particular, we find that better companies and more experienced VCs receive better contract terms, whereas older companies receive harsher contracts. We also confirm the role of concentration and proximity in financial contracts.

Optimal design of venture capital financing contracts: the case of Portuguese, Spanish and German markets

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Maria do Rosario Correia ◽  
Raquel F. Ch Meneses
Keyword(s):  
Venture Capital ◽  
Qualitative Comparative Analysis ◽  
Contract Design ◽  
Control Rights ◽  
Content Type ◽  
Convertible Securities ◽  
Mixed Support ◽  
Capital Financing ◽  
Control Right ◽  
And Control

Purpose This study aims to investigate the use of convertible securities and control rights covenants for a sample of 53 Portuguese, Spanish and German venture capital (VC) firms. Design/methodology/approach A relatively new methodology in business sciences – a fuzzy set qualitative comparative analysis – that considers both quantitative and qualitative factors is used for obtaining a solution that best fits the empirical data. Findings The results show that the use of convertible securities is affected by agency predictions, namely, the anticipated severity of double-sided moral hazard problems. On the other hand, a mixed support is provided to the agency predictions regarding the use of control right covenants. The results seem to suggest that control right covenants tend to play a different role from convertible securities in the optimization of contract design for VC-backed investments. Originality/value Existing literature on VC contract design is extended by providing a cross-border analysis to VC financing decision.

The Role of Shariah Law in Islamic Financial Contracts in the UK and the US : A Comparative Analysis

2017 ◽  
Vol 8 (2) ◽  
pp. 244-255
Author(s):  
Apnizan Abdullah ◽  
Shahrul Mizan Ismail ◽  
Halila Faiza Zainal Abidin
Keyword(s):  
Comparative Analysis ◽  
Financial Contracts ◽  
The Us ◽  
The Uk

Foreign venture capital firms and internationalization of ventures

2020 ◽  
Vol 28 (3) ◽  
pp. 381-399 ◽  
Author(s):  
Heejin Woo
Keyword(s):  
Venture Capital ◽  
Design Methodology ◽  
Linear Models ◽  
Strategic Decisions ◽  
Foreign Markets ◽  
Content Type ◽  
The Us ◽  
Venture Capital Firms ◽  
Logistic Regressions

Purpose The purpose of this study is to examine how foreign venture capital firms affect the internationalization of investee ventures and their performance. The author argues that, as influential stakeholders, foreign venture capital (VC) firms engage in strategic decisions of investee ventures and may positively contribute to ventures’ business in foreign markets. Design/methodology/approach The study examines 551 VC-backed ventures that went public between 2000 and 2014 in the US. Logistic regressions and generalized linear models are used to test hypotheses, and the two-stage approach is used to address a potential endogeneity issue. Findings In the empirical results, the author finds that foreign VC investment is positively associated with the internationalization of ventures in terms of both the likelihood of internationalization and foreign sales intensity. In addition, the author finds that internationalization and foreign sales intensity are positively associated with firm performance when a venture is backed by a foreign VC firm. Originality/value This study makes important theoretical and empirical contributions to the international entrepreneurship literature by highlighting the role of foreign VC investors on internationalization of ventures.

Business-groups in Russian industries

2004 ◽  
pp. 121-134 ◽  
Author(s):  
S. Avdasheva
Keyword(s):  
Industrial Organization ◽  
Economic System ◽  
Institutional Economics ◽  
Business Groups ◽  
Control Rights ◽  
Organization And Management ◽  
Russian Economy ◽  
Main Determinants ◽  
Soviet Economic System

The chapter of “Institutional Economics” textbook is devoted to the development of business-groups as a specific feature of industrial organization in the Russian economy. The main determinants of forming and functioning of business-groups such as allocation of property rights in Soviet enterprises, networks of directors and executive authorities in the Soviet economic system as well as import of new institutes and inefficient state enforcement are in the center of analysis. Origins, structure, organization and management within the groups and the role of shareholding and informal control rights are considered.

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