A Theory of Convertible Securities for the Early Stage Venture Capital Finance: A Perspective of Entrepreneurial Discount Rate and Its Related Issues
博士 === 國立臺灣大學 === 國際企業學研究所 === 98 === Venture capital is a charming issue. We explore the relative ratio of discount rates between the venture capitalist and the entrepreneur in a setting that the venture capitalist and the entrepreneur are both principals and agents. The verifiability of venture...
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| Format: | Others |
| Language: | en_US |
| Published: |
2010
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| Online Access: | http://ndltd.ncl.edu.tw/handle/84267154398916740606 |
| Summary: | 博士 === 國立臺灣大學 === 國際企業學研究所 === 98 === Venture capital is a charming issue. We explore the relative ratio of discount rates between the venture capitalist and the entrepreneur in a setting that the venture capitalist and the entrepreneur are both principals and agents. The verifiability of venture value leads us to know the efforts devotion and its respective impacts on discount rates better. The incentive behind the convertible preferred shares used for the venture finance has been considered as equivalent to the financing with some constraints imposed on the common shares. On the convertible incomplete contract, the putable/callable options enhance the incentives and reduce the uncertainty in the early stage of venture finance. A new equilibrium is brought when a lemon problem is faced with unexpected actions taken by both. The underinvestment/overinvestment problem has been considered from the private benefit and the value creation of venture of both sides. In our paper, the venture capitalist may be induced to overinvest by the NPV-like rule. The equilibrium leads us to know the interactive relationships and the distribution of venture value between two players well as proper strategies are applied.
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