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Financial Contracting Theory Meets the Real World: An Empirical Analysis of Venture Capital Contracts
Article first published online: 3 JUL 2003
DOI: 10.1111/1467-937X.00245
1467-937X/asset/cover.gif?v=1&s=0a4d3c8db6f202a2e6293774a9f78849ebd4bc9c "Review of Economic Studies")
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How to Cite
Kaplan, S. N. and Strömberg, P. (2003), Financial Contracting Theory Meets the Real World: An Empirical Analysis of Venture Capital Contracts. Review of Economic Studies, 70: 281–315. doi: 10.1111/1467-937X.00245
Publication History
- Issue published online: 3 JUL 2003
- Article first published online: 3 JUL 2003
- Received on March 2000 and accepted for publication on March 2002
- Abstract
- Article
- References
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We compare the characteristics of real-world financial contracts to their counterparts in financial contracting theory. We do so by studying the actual contracts between venture capitalists (VCs) and entrepreneurs. The distinguishing characteristic of VC financings is that they allow VCs to separately allocate cash flow rights, board rights, voting rights, liquidation rights, and other control rights. We describe and measure these rights. We then interpret our results in relation to existing financial contracting theories. We also describe the interrelation and the evolution across financing rounds of the different rights.