Venture Capital and Private Equity Contracting: An International Perspective

by Douglas J. Cumming, Sofia A. Johan

Overview

This book offers broad perspectives and principles of the ways that law and economics work together that enable readers to deduce the economic implications of specific contract terms. It contains sample contracts, including limited partnership agreements, term sheets, shareholder agreements, and subscription agreements.

Product Details

ISBN-13:	9780121985813
Publisher:	Elsevier Science
Publication date:	01/21/2009
Edition description:	New Edition
Pages:	792
Product dimensions:	6.20(w) x 9.10(h) x 1.80(d)

About the Author

Douglas Cumming, J.D., Ph.D., CFA, is the DeSantis Distinguished Professor of Finance and Entrepreneurship the College of Business, Florida Atlantic University. His research interests include crowdfunding, venture capital, private equity, hedge funds, entrepreneurship, and law and finance. He is the Managing Editor-in-Chief of the Journal of Corporate Finance (2018-2020) and the incoming Co-Editor-in-Chief of the British Journal of Management (2020-2022). He been a guest editor for over a dozen special issues of top journals. He has published over 180 articles in leading refereed academic journals in finance, management, and law and economics, such as the Academy of Management Journal, Journal of Financial Economics, Review of Financial Studies, Journal of International Business Studies, and the Journal of Empirical Legal Studies. His work has been reviewed in numerous media outlets, including the Chicago Tribune, The Economist, Canadian Business, the National Post, the New York Times, and The New Yorker. Douglas is a regular speaker at academic and industry conferences around the world. He has given recent keynote speeches at the British Academy of Management Corporate Governance Conference, Entrepreneurial Finance Association, Financial Research Network Corporate Finance Conference, French Finance Association, Infiniti Conference on International Finance, Vietnam Symposium in Banking and Finance, the Budapest Liquidity and Financial Markets Conference, and the Humbolt University of Berlin Fintech Conference, among others. Much of Douglas Cumming’s work is online at SSRN: http://ssrn.com/author=75390

Sofia Johan, LL.B (Liverpool), LL.M. in International Economic Law (Warwick), Ph.D. in Law and Economics (Tilburg), is an Assistant Professor of Finance and Fellow, Phil Smith Center for Free Enterprise, at the College of Business, Florida Atlantic University. She is also the AFM Senior Research Fellow at the Tilburg Law and Economics Centre (TILEC) in The Netherlands. Her research is primarily focused on law and finance, market surveillance, hedge funds, venture capital, private equity and IPOs. Her recent publications have appeared in numerous journals including the Journal of Financial Economics, Journal of International Business Studies, American Law and Economics Review, International Review of Law and Economics, Journal of Banking and Finance, European Financial Management, European Economic Review, and Entrepreneurship Theory and Practice, among numerous other journals. Her work has been presented at the American Law and Economics Association, the American Economics Association, European Law and Economics Association, the European Financial Management Association, and other leading international conferences. Prior to winning her Ph.D., she was the head legal counsel at the largest government owned venture capital fund in Malaysia. She has also consulted for a variety of governmental and private organizations in Australasia and Europe. http://ssrn.com/author=370203

Table of Contents

Preface ix

Part 1 Introduction 1

1 Introduction and Overview 3

2 Overview of Agency Theory 27

3 Overview of Institutional Contexts, Empirical Methods 51

Part 2 Fund Structure and Governance 67

4 What Should Fund Managers Care About? Perspectives from Institutional Investors 69

5 Limited Partnership Agreements 93

6 Compensation Contracts 129

7 Fundraising and Regulation 163

8 Specialized Investment Mandates 207

9 The Role of Government and Alternative Policy Options 241

Part 3 Financial Contracting between Funds and Entrepreneurs 281

10 The Investment Process 283

11 Security Design 297

12 Security Design and Adverse Selection 359

13 Corporate Venture Capital Fund Contracts 389

14 Preplanned Exits and Contract Design 409

Part 4 Investor Effort 449

15 Investor Value-added 451

16 Contracts and Effort 459

17 Home Bias 503

18 Portfolio Size 533

Part 5 Divestment 581

19 The Divestment Process 583

20 Exit Outcomes 599

21 Contracts and Exits 649

22 Valuation, Returns, and Disclosure 699

Part 6 Conclusion 721

23 Summary and Concluding Remarks 723

Online Appendices (venturecapitalprivateequitycontracting.com) 727

References 729

Index 755

What People are Saying About This

From the Publisher

Provides an international perspective on financial contracting and the effects on governance and performance in venture capital and private equity

Editorial Reviews

"The book covers many facets of venture capital and private equity contracting, from the birth of a venture capital fund to its exit, giving readers a complete and comprehensive picture about the venture capital and private equity industry." —Xuan Tian, Indiana University

From the Publisher