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Covenants in venture capital contracts / Ola Bengtsson in Management science, Vol. 57 N° 11 (Novembre 2011) 

Public ISBD [article]  in Management science > Vol. 57 N° 11 (Novembre 2011) . - pp. 1926-1943 Titre : Covenants in venture capital contracts Type de document : texte imprimé Auteurs : Ola Bengtsson, Auteur Année de publication : 2012 Article en page(s) : pp. 1926-1943 Note générale : Management Langues : Anglais (eng) Mots-clés : Financial  contracting  Venture  capital  Entrepreneurship Index. décimale : 658 Organisation des entreprises. Techniques du commerce Résumé : This paper studies how covenants are included in contracts between venture capitalists (VCs) and entrepreneurs. I show that VCs hold covenanted veto rights even though they are shareholders who have access to other powerful governance solutions. Unlike bank loans and bonds, venture capital (VC) contracts exhibit considerable variation in their contractual designs. I exploit this variation to confirm the argument that covenants are in place to overcome a conflict of interest that arises from debt-like contractual features of a venture capitalist's preferred stock. In particular, I find that contracts with higher fixed payoffs include 1.6 more covenants than do contracts with lower fixed payoffs. Similarly, VC contracts with no VC board majority requirement include 0.6 more covenants than do contracts that require a VC board majority. Covenants are also more common with older companies and when fewer VCs invest in a round. My findings contribute to both the debt covenant literature and the entrepreneurial finance literature. DEWEY : 658 ISSN : 0025-1909 En ligne : http://mansci.journal.informs.org/content/57/11/1926.abstract [article] Covenants in venture capital contracts [texte imprimé] / Ola Bengtsson, Auteur . - 2012 . - pp. 1926-1943. Management Langues : Anglais (eng) in Management science > Vol. 57 N° 11 (Novembre 2011) . - pp. 1926-1943 Mots-clés : Financial  contracting  Venture  capital  Entrepreneurship Index. décimale : 658 Organisation des entreprises. Techniques du commerce Résumé : This paper studies how covenants are included in contracts between venture capitalists (VCs) and entrepreneurs. I show that VCs hold covenanted veto rights even though they are shareholders who have access to other powerful governance solutions. Unlike bank loans and bonds, venture capital (VC) contracts exhibit considerable variation in their contractual designs. I exploit this variation to confirm the argument that covenants are in place to overcome a conflict of interest that arises from debt-like contractual features of a venture capitalist's preferred stock. In particular, I find that contracts with higher fixed payoffs include 1.6 more covenants than do contracts with lower fixed payoffs. Similarly, VC contracts with no VC board majority requirement include 0.6 more covenants than do contracts that require a VC board majority. Covenants are also more common with older companies and when fewer VCs invest in a round. My findings contribute to both the debt covenant literature and the entrepreneurial finance literature. DEWEY : 658 ISSN : 0025-1909 En ligne : http://mansci.journal.informs.org/content/57/11/1926.abstract