Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/25477
Authors: 
Bienz, Carsten
Hirsch, Julia
Year of Publication: 
2005
Series/Report no.: 
CFS Working Paper 2006/11
Abstract: 
We analyze the degree of contract completeness with respect to staging of venture capital investments using a hand-collected German data set of contract data from 464 rounds into 290 entrepreneurial firms. We distinguish three forms of staging (pure milestone financing, pure round financing and mixes). Thereby, contract completeness reduces when going from pure milestone financing via mixes to pure round financing. We show that the decision for a specific form of staging is determined by the expected distribution of bargaining power between the contracting parties when new funding becomes necessary and the predictability of the development process. To be more precise, parties choose the more complete contracts the lower the entrepreneur’s expected bargaining power - the maximum level depending on the predictability of the development process.
Subjects: 
Venture Capital
Corporate Governance
Moral Hazard
Renegotiation
Contract Theory
Empirical Contract Theory
Contract Econometrics
JEL: 
G24
G32
D86
D80
G34
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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