Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/104181
Authors: 
Gebhardt, Georg
Schmidt, Klaus M.
Year of Publication: 
2006
Series/Report no.: 
Munich Discussion Paper 2006-13
Abstract: 
When a young entrepreneurial firm matures, it is often necessary to replace the founding entrepreneur by a professional manager. This replacement decision can be affected by the private benefits of control enjoyed by the entrepreneur which gives rise to a conflict of interest between the entrepreneur and the venture capitalist. We show that a combination of convertible securities and contingent control rights can be used to resolve this conflict efficiently. This contractual arrangement is frequently observed in venture capital finance.
Subjects: 
Corporate Finance
Venture Capital
Control Rights
Convertible Securities
JEL: 
D23
G24
G32
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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