We compare the characteristics of real-world financial contracts to their counterparts in contracting theory. do so by studying actual between venture capitalists (VCs) and entrepreneurs. The distinguishing characteristic VC financings is that they allow VCs separately allocate cash flow rights, board voting liquidation other control rights. describe measure these then interpret our results relation existing theories. also interrelation evolution across financing rounds different

ABSTRACT We study the investment analyses of 67 portfolio investments by 11 venture capital (VC) firms. VCs describe strengths and risks as well expected postinvestment actions. classify into three categories relate them to allocation cash flow rights, contingencies, control liquidation rights between entrepreneurs. The risk results suggest that agency hold‐up problems are important contract design monitoring, but sharing is not. Greater VC associated with increased management intervention,...

In a leveraged buyout, company is acquired by specialized investment firm using relatively small portion of equity and large outside debt financing. The buyout firms today refer to themselves (and are generally referred to) as private firms. We describe present time series evidence on the industry, considering both transactions. discuss existing empirical economics consider similarities differences between recent wave 1980s. Finally, we speculate what implies for future equity.

Theoretical work on the principal-agent problem in financial contracting focuses conflicts of interest between an agent / entrepreneur with a venture that needs financing, and principal investor providing funds for venture. Theory has identified three primary ways can mitigate these - structuring contracts, pre-investment screening, post-investment monitoring advising. In this paper, we describe recent empirical its relation to theory one prominent class principals capitalists (VCs). The...

ABSTRACT A long‐standing controversy is whether leveraged buyouts (LBOs) relieve managers from short‐term pressures public shareholders, or LBO funds themselves sacrifice long‐term growth to boost performance. We examine one form of long‐run activity, namely, investments in innovation as measured by patenting activity. Based on 472 transactions, we find no evidence that LBOs investments. firm patents are more cited (a proxy for economic importance), show shifts the fundamental nature...

ABSTRACT We study how firm characteristics evolve from early business plan to initial public offering (IPO) company for 50 venture capital (VC)‐financed companies. Firm lines remain remarkably stable while management turnover is substantial. Management positively related alienable asset formation. obtain similar results using all 2004 IPOs, suggesting that our main are not specific VC‐backed firms or the time period. The suggest that, at margin, investors in start‐ups should place more...

ABSTRACT Private equity funds pay particular attention to capital structure when executing leveraged buyouts, creating an interesting setting for examining theories. Using a large, international sample of buyouts from 1980 2008, we find that buyout leverage is unrelated the cross‐sectional factors, suggested by traditional theories, drive public firm leverage. Instead, variation in economy‐wide credit conditions main determinant buyouts. Higher deal associated with higher transaction prices...

ABSTRACT Private equity funds are important to the economy, yet there is little analysis explaining their financial structure. In our model structure minimizes agency conflicts between fund managers and investors. Relative financing each deal separately, raising a where manager receives fraction of aggregate excess returns reduces incentives make bad investments. Efficiency further improved by requiring also use deal‐by‐deal debt financing, which becomes unavailable in states internal...

Abstract Sweden was one of the first countries to introduce a carbon tax back in 1991. We assemble unique data set tracking CO2 emissions from Swedish manufacturing firms over 26 years estimate impact pricing on firm-level emission intensities. an emission-to-pricing elasticity around two, with substantial heterogeneity across subsectors and firms, where higher abatement costs tighter financial constraints are associated lower elasticities. A simple calibration suggests that 2015 would have...

In this paper, we compare the characteristics of real world financial contracts to their counterparts in contracting theory. We do so by conducting a detailed study actual between venture capitalists (VCs) and entrepreneurs. consider VCs be entities who most closely approximate investors (1) The distinguishing characteristic VC financings is that they allow separately allocate cash flow rights, voting board liquidation other control rights. explicitly measure report allocation these (2)...

I develop and estimate a model of cash auction bankruptcy using data on 205 Swedish firms. The results challenge arguments that auctions, as compared to reorganizations, are immune conflicts interest between claimholders but lead inefficient liquidations. show sale the assets back incumbent management is common outcome. Sale‐backs more likely when they favor bank at expense other creditors. On hand, liquidations frequently avoided through sale‐backs markets illiquid, is, industry...

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Journal Article Fiduciary Duties and Equity-debtholder Conflicts Get access Bo Becker, Becker Harvard Business School NBER Search for other works by this author on: Oxford Academic Google Scholar Per Strömberg SIFR, Stockholm of Economics, ECGI, CEPR The Review Financial Studies, Volume 25, Issue 6, June 2012, Pages 1931–1969, https://doi.org/10.1093/rfs/hhs006 Published: 13 March 2012

The growth of the private equity industry has spurred concerns about its impact on economy. This analysis looks across nations and industries to assess performance. We find that where funds invest grow more quickly in terms total production employment appear less exposed aggregate shocks. Our robustness tests provide some evidence is consistent with our effects being driven by preferred channel. paper was accepted Amit Seru, finance.

Abstract We examine the role private equity (PE) sponsors play in resolution of financial distress portfolio companies. PE-backed firms have higher leverage and default at rates than other companies borrowing leveraged loan markets. But, restructure more quickly, avoid bankruptcy court often, liquidate less often compared to highly experiencing distress. PE owners are also likely retain control post-restructuring, by infusing capital as approach While frequencies among firms, investors...

Researchers increasingly have used the two primary venture capital databases - VentureOne and Venture Economics to study (VC) financings. These data are largely self-reported. In this paper, we compare actual contracts in 143 VC financings their characterizations databases. The exclude roughly 15% of financing rounds. database oversamples larger rounds California companies while included exhibit no significant bias. provide unbiased, but noisy measures amounts valuations. also less...

A long-standing controversy is whether LBOs relieve managers from short-term pressures of dispersed shareholders, or LBO funds themselves are driven by profit motives and sacrifice long-term growth to boost performance. We investigate 495 transactions with a focus on one form activities, namely investments in innovation as measured patenting activity. find no evidence that decrease these activities. Relying standard measures patent quality, we patents applied for firms private equity more...

We study how firm characteristics evolve from early business plan to IPO public company for 50 venture capital (VC) financed companies. find that lines remain remarkably stable while management turnover is substantial. Management positively related the formation of alienable assets. obtain similar results an out-of-sample analysis all 2004 IPOs indicating our main are not specific VC-backed firms or time period. The suggest that, at margin, investors in start-ups should place more weight on...

Private equity funds pay particular attention to capital structure when executing leveraged buyouts, creating an interesting setting for examining theories. Using a large, detailed, international sample of buyouts from 1980-2008, we find that buyout leverage is unrelated the cross-sectional factors – suggested by traditional theories drive public firm leverage. Instead, variation in economy-wide credit conditions main determinant while having little impact on firms. Higher deal associated...

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We describe and present time series evidence on the leveraged buyout / private equity industry, both firms transactions.We discuss existing empirical economics of consider similarities differences between recent wave 1980s.Finally, we speculate what implies for future equity.

This paper provides an empirical analysis of the financial structure large recent buyouts. We collect detailed information financings 153 buyouts (averaging over $1 billion in enterprise value). document manner which these important transactions are financed. Buyout leverage is cross-sectionally unrelated to matched public firms, and largely driven by other factors than what explains firms. In particular, economy-wide cost borrowing seems drive both pricing These results consistent with a...

We examine the role of private equity (PE) sponsors in resolution financial distress portfolio companies. PE-backed firms have higher leverage and default at rates than other companies borrowing loan markets. However, conditional on contemporaneous leverage, are not significantly higher. Among leveraged borrowers that experience a default, we find restructure more quickly often out court, less likely to be liquidated. PE owners retain control post-restructuring pre-default owners, by...