We examine the relation between optimal venture capital contracts and the supply anddemand for venture capital. Both the composition and type of financial claims held by the venture capitalist and entrepreneur depend on the market structure. Moreover, different market structures involve...

We consider the joint optimal design of CEOs severance pay and on-the-job pay in a modelin which the CEO has interim private information about the likely success of his strategy. The board faces a tradeoff between reducing the likelihood that the firm forgoes an efficient strategy change and...

This paper shows that investors financing a portfolio of projects may use the depth of their financial pockets to overcome entrepreneurial incentive problems. While competition for scarce informed capital at the refinancing stage increases the investor's ex post bargaining position, it may...

We consider an imperfectly competitive loan market in which a local relationship lender has an information advantage vis-agrave;-vis distant transaction lenders. Competitive pressure from the transaction lenders prevents the local lender from extracting the full surplus from projects, so that she...

Hierarchy can function as an instrument to channel influence activities or power struggles in organizations. Contrary to what has frequently been argued, we show that multi-divisional organizations may involve lower influence costs than single-tier organizations, even though they offer more...

We show that the success probability, financial contract, pre-money valuation, and value created in a start-up firm depend strongly on the characteristics of the capital market in which the start-up raises finance, such as the level of capital supply and degree of capital market competition,...

We show that the pricing, contractual structure, and efficiency of venture capital deals depends on characteristics of the capital market in which the start-up raises finance. Market characteristics such as the expected return on investments, entry costs, and capital market transparency all...