Capital structure and contracting

Module 5

This week aims to answer the following questions:

  1. What factors drive the contracting between entrepreneur and investor?
  2. What are the patterns of contracting and security design in venture capital-backed startups?
  3. What does the capital structure of the entrepreneurial firm look like?
Slides (coming soon)

Required and suggested readings

We will cover three papers and the institutional details required to understand them.  Read these two papers before class and skim the articles on the week 5 reading list.

Kaplan, S.N. and Strömberg, P. (2004) ‘Characteristics, Contracts, and Actions: Evidence from Venture Capitalist Analyses’, The Journal of Finance, 59(5), pp. 2177–2210.

Robb, A.M. and Robinson, D.T. (2014) ‘The Capital Structure Decisions of New Firms’, The Review of Financial Studies, 27(1), pp. 153–179.

Amornsiripanitch, N., Gompers, P.A. and Xuan, Y. (2019) ‘More than Money: Venture Capitalists on Boards’, The Journal of Law, Economics, and Organization, 35(3), pp. 513–543.