Venture capital contracting and syndication
Subtitle: an experiment in computational corporate finance
By: Zsuzsanna Fluck, Kedran Garrison, Stewart C. Myers.
Contributors: Garrison, Kedran.; Myers, Stewart C.; National Bureau of Economic Research.
Series: NBER working paper series ;; working paper 11624; Working paper series (National Bureau of Economic Research : Online) ;; working paper no. 11624.
Publisher: National Bureau of Economic Research
Published: 2005
Place of publication: Cambridge, MA
Language: eng
Format: Electronic resource
Subjects: Venture capital -- Mathematical models.
Description: "This paper develops a model to study how entrepreneurs and venture-capital investors deal with moral hazard, effort provision, asymmetric information and hold-up problems.  We explore several financing scenarios, including first-best, monopolistic, syndicated and fully competitive financing.  We solve numerically for the entrepreneur's effort, the terms of financing, the venture capitalist's investment decision and NPV.  We find significant value losses due to holdup problems and under-provision of effort that can outweigh the benefits of staged financing and investment.  We show that a commitment to later-stage syndicate financing increases effort and NPV and preserves the option value of staged investment.  This commitment benefits initial venture capital investors as well as the entrepreneur"--National Bureau of Economic Research web site.
Notes: Includes bibliographical references.
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