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Working Paper
Financing Ventures: Some Macroeconomics
The relationship between venture capital and growth is examined using an endogenous growth model incorporating dynamic contracts between entrepreneurs and venture capitalists. At each stage of financing, venture capitalists evaluate the viability of startups. If viable, venture capitalists provide funding for the next stage. The success of a project depends on the amount of funding. The model is confronted with stylized facts about venture capital; viz., statistics by funding round concerning the success rates, failure rates, investment rates, equity shares, and IPO values. Raising capital ...
Working Paper
Financing Ventures
The relationship between venture capital and growth is examined using an endogenous growth model incorporating dynamic contracts between entrepreneurs and venture capitalists. At each stage of financing, venture capitalists evaluate the viability of startups. If viable, venture capitalists provide funding for the next stage. The success of a project depends on the amount of funding. The model is confronted with stylized facts about venture capital: statistics by funding round concerning success rates, failure rates, investment rates, equity shares, and IPO values. The increased efficiency ...
Working Paper
Financing Ventures
The relationship between venture capital and growth is examined using an endogenous growth model incorporating dynamic contracts between entrepreneurs and venture capitalists. At each stage of financing, venture capitalists evaluate the viability of startups. If viable, venture capitalists provide funding for the next stage. The success of a project depends on the amount of funding. The model is confronted with stylized facts about venture capital; viz., statistics by funding round concerning the success rates, failure rates, investment rates, equity shares, and IPO values. Raising capital ...
Working Paper
Financing Ventures
The relationship between venture capital and growth is examined using an endogenous growth model incorporating dynamic contracts between entrepreneurs and venture capitalists. At each stage of financing, venture capitalists evaluate the viability of startups. If viable, venture capitalists provide funding for the next stage. The success of a project depends on the amount of funding. The model is confronted with stylized facts about venture capital: statistics by funding round concerning success rates, failure rates, investment rates, equity shares, and IPO values. The increased efficiency ...
Working Paper
Optimal Financial Contracting and the Effects of Firm’s Size
We consider the design of the optimal dynamic policy for a firm subject to moral hazard problems. With respect to the existing literature we enrich the model by introducing durable capital with partial irreversibility, which makes the size of the firm a state variable. This allows us to analyze the role of firm’s size, separately from age and financial structure. We show that a higher level of capital decreases the probability of liquidation and increases the future size of the firm. Althoughanalytical results are not available, we show through simulations that, conditional on size, the ...
Report
Disagreement and learning in a dynamic contracting model
We present a dynamic contracting model in which the principal and the agent disagree about the resolution of uncertainty, and we illustrate the contract design in an application with Bayesian learning. The disagreement creates gains from trade that the principal realizes by transferring payment to states that the agent considers relatively more likely, a shift that changes incentives. In our dynamic setting, the interaction between incentive provision and learning creates an intertemporal source of ?disagreement risk? that alters optimal risk sharing. An endogenous regime shift between ...
Working Paper
Financing Ventures
The relationship between venture capital and growth is examined using an endogenous growth model incorporating dynamic contracts between entrepreneurs and venture capitalists. At each stage of Önancing, venture capitalists evaluate the viability of startups. If viable, venture capitalists provide funding for the next stage. The success of a project depends on the amount of funding. The model is confronted with stylized facts about venture capital: viz., statistics for each round of funding that concern the success rates, failure rates, investment rates, equity shares, and IPO values. ...