Venture capital contracting with renegotiation

Arieh Gavious, Ramy Elitzur

Research output: Contribution to journalArticlepeer-review

Abstract

This paper examines contracting between a venture capitalist and an entrepreneur in a setting with unobservable effort when contracts are renegotiated each period. The contribution of our paper lies in the insights it provides on optimal contracts in this setting. The insights from our model prove to be significantly different in certain respects than those obtained under a multi-period contract without renegotiation or a single period setting. An example is worked out to illustrate the division of payoff between the venture capitalist and the entrepreneur each period.

Original languageEnglish
Pages (from-to)67-78
Number of pages12
JournalEconomics Bulletin
Volume29
Issue number1
StatePublished - 1 Dec 2009

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