Aspects of Financial Contracting in Venture Capital

ASPECTS OF FINANCIAL by William A. Sahlman, CONTRACTING IN Harvard Business School make CAPITAL INTRODUCTION During much of the 1960s and 1970s, academic discussions of corporate hood structure routinely began with the assumption that a firms financing decisions had no material effect on its intrinsic economic measure out. shot aside tax consequences and the possibility of a costly bankruptcy, the value of the firm was assumed to depend solely on the level and peril of a firms operate cash flows. And in operation(p) profitability in turn was assumed to depend wholly on corporate investment decisions that are made prior to, and on the whole independently of, financing choices.1 In the last ten years or so, however, finance scholarship has progressively reversed this assumption while entertain the possibility that the way a transaction is financed can influence operating outcomes in predictable, systematic ways2 And the results of this new thinkingespecially the office of the agency cost literature to our understanding of the current wave of financial restructurings have been interesting.

3 Further support for this relatively new counselor in finance may also come from an area of teach beyond the usual academic focus on humanity corporations: namely, the venture capital markets. For, the interaction of entrepreneur and venture capitalist has resulted in the evolution of a unique set of financial contracts. And in no other kind of transaction does the implied link amid value and financial structure appear so strong and develop as in the typical venture capital deal. As I hope to show in this article, an effective financial creation may well be the difference between a palmy and a failed (if not a still-born) enterprise. 1. The original formulation of the capital structure irrelevance argument was by Franco Modigliani and Merton Miller, The Cost of Capital, grass Finance and the Theory of Investment, American... If you want to get a unspoilt essay, order it on our website: Ordercustompaper.com

Ordercustompaper.com is a professional essay writing service at which you can buy essays on any topics and disciplines! All custom essays are written by professional writers!