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Venture financing of start-ups: A model of contract between VC fund and entrepreneur  [PDF]
Osintsev Yury
Economic Annals , 2010, DOI: 10.2298/eka1087061o
Abstract: Venture capital has become one of the main sources of innovation in the modern, global economy. It is not just a substitute for bank loans: it has proven to be a more efficient way of financing projects at different stages. On one hand, venture financing allows for projects with higher risk, which leads to the possibility of higher returns on investment. On the other hand, venture investors who usually have managerial experience often participate in governing the business, which certainly adds value to the enterprise. In this paper we establish the model of contract between the venture capital fund and the entrepreneur, focusing on probably the most important issue of this contract: the shares of the parties in the business. The shares in the company determine the distribution of the joint surplus. The expected joint profits are not just exogenously specified in the contract but are dependent on the behavioral variables of both parties at the stage of fulfilling the contract. We call the behavioral variable of the entrepreneur ‘effort’ and the one of the venture fund ‘advice’. The probability of the project’s success, and hence the expected joint revenues, are increased by these two. However, both kinds of effort are costly to the respective parties that have made them. Based on this fact we can elaborate the profit functions of both sides of the contract. Our model can be considered as a basis for specifying contracts concerning venture financing. It can provide the logic for how the equilibrium shares of entrepreneur and venture fund are obtained.
The Development of Venture Financing Mechanisms in Russia  [PDF]
Panyagina Asya Evgenyevna
Sovremennaa Ekonomika : Problemy, Tendencii, Perspektivy , 2012,
Abstract: The work deals with the role of venture financing as an economic mechanism, which contributes to the development of innovative activities and enables to minimize the risk of certain investors. The work gives an overview of the basic stages in the development of venture financing mechanisms in Russia.
State Financing and Stimulation of Development of Venture Investment into Models of Open Innovations Государственное финансирование и стимулирование развития венчурного инвестирования в модели открытых инноваций  [PDF]
Zhylinska Oksana I.
Business Inform , 2013,
Abstract: The article reveals specific features of overcoming such a disfunction of the market in the sphere of scientific and technical and innovation activity as non-full markets. Result is achieved through mechanisms of state financing and state stimulation of development of venture investment in the context of development of the concept of open innovations. The state will re-orient from the main source of financing venture entrepreneurship to the activator of development of venture investment. The programmes of state support and stimulation of venture entrepreneurship and venture investment give a possibility not only to provide income for venture investors, but to accelerate creation of new markets, which results in structural shifts in production and consumption while realising the function of “constructive destruction”. В статье раскрыты особенности преодоления такой дисфункции рынка в сфере научно-технической и инновационной деятельности, как неполные рынки. Результат достигается через механизмы государственного финансирования и государственного стимулирования развития венчурного инвестирования в контексте становления концепции открытых инноваций. Государство переориентируется от главного источника финансирования венчурного предпринимательства к активизатору развития венчурного инвестирования. Программы государственной поддержки и стимулирования венчурного предпринимательства и венчурного инвестирования дают возможность не только обеспечить доходы венчурных инвесторов, но и ускорить создание новых рынков, что приводит к структурным сдвигам в производстве и потреблении, реализуя функцию созидательного разрушения .
VENTURE FINANCING OF NANOTECHOLOGY IN RUSSIA: PROBLEMS AND PRIORITIES/ ВЕНЧУРНОЕ ФИНАНСИРОВАНИЕ НАНОТЕХНОЛОГИЙ В РОССИИ : ПРОБЛЕМЫ И ПРИОРИТЕТЫ  [cached]
M.V. Vasiljeva,G.E. Muslimova
Voprosy Sovremennoj èkonomiki , 2013,
Abstract: The article discloses the role of venture capital in the development of nanoindustry in Russia compared to other sources of funding nanotechnology projects in terms of its integration into the global innovation environment. The main problems of the venture industry in Russia and prerequisites of the existing model of venture funding of nanotechnology transformation are identified as well as conceptual directions for improvement are developed.
Analysis and Appraisal of the Venture Financing of Farmers Losing Land to Urban New District Construction  [cached]
Guoqu Deng
Asian Social Science , 2009, DOI: 10.5539/ass.v5n7p77
Abstract: Taking Luonan New District as an example, from the aspects of financing channels, financing scales, financing costs, financing income and financing efficiency this article analyzes the venture financing of farmers losing land to urban new district construction. It is believed that internal financing plays a main part, but its proportion decreases year by year; the limitation of self-accumulation and institutional supply makes the financing demand of farmers losing land unable to be met; and internal financing efficiency is higher than external financing efficiency. Therefore, a resultant force from the farmers losing land, the government, the society and the community should be formed, so as to solve the problem of the venture financing of farmers losing land.
Valuation and Financing of Cash Cows and Growth Firms  [PDF]
Joseph P. Ogden, Shanhong Wu
Journal of Mathematical Finance (JMF) , 2013, DOI: 10.4236/jmf.2013.33A001
Abstract:

This paper develops separate trade-off models for the valuation and financing of non-growth firms (cash cows) and growth firms that incorporate tax benefits, bankruptcy costs, and relevant agency costs. Cash cows generally have relatively high leverage, though firm value, leverage, and profitability are all affected by variations in the efficacy of both internal and external governance mechanisms to mitigate agency costs of managerial discretion. For growth firms, where agency costs of debt are relevant, we find that: 1) optimal leverage is generally relatively low; 2) the relationship between optimal leverage and Tobin’s Q is negative and highly convex; and 3) optimal leverage increases with initial profitability. Our analysis helps to explain anomalous results documented in previous empirical tests of trade-off theory, specifically, relationships between leverage and both the market-to-book assets ratio and profitability.

Cash settlement impact on fed cattle futures contract basis risk in Brazil
Rochelle, Thereza Christina Pippa;Ferreira Filho, Joaquim Bento de Souza;
Revista Brasileira de Economia , 2000, DOI: 10.1590/S0034-71402000000200001
Abstract: this paper examines the impact of cash settlement on the commodities & futures exchange (bolsa de mercadorias & futuros, bm&f) fed cattle futures contract basis risk, in nine regions in brazil. the analysis was conducted only during the contract maturity months, and the random component of the basis series, which represents the risk, was isolated through successive lags in the original series. then, the standard deviations of the random component of the basis (that represent basis risk) were regressed on dummy variables for cash settlement and seasonal effects. the regression model was estimated for every location and sex. the results lead to the conclusion that basis risk has been reduced after the introcustion of cash settlement for both male and female animals in all nine regions. moreover, basis risk is lower for contract maturity months placed in the first half of the year than in for those in the second semester.
Allocation of Control Rights between Venture Capitalist and Entrepreneur by Game Theory
风险企业控制权分配的博弈过程分析

安实,王健,何琳
系统工程理论与实践 , 2002,
Abstract: High risks and asymmetric information in venture investment lead the allocation of control rights between venture capitalist and entrepreneur to become a key problem in the successful operation of venture project. This paper analyzes the allocation of control rights between venture capitalist and entrepreneur by game theory, including their objective in the game during the allocation of control rights, the game between them before venture finance, during the negotiation on the allocation of control rights and on the enforcement of the control rights, which are instructive for venture capitalist participating in the allocation of control rights and making investment decision.
The venture capital contract and the Institutional Theory in a Spanish setting  [cached]
Ma Camino Ramón-Llorens,Ginés Hernández-Cánovas
Intangible Capital , 2013, DOI: http://dx.doi.org/10.3926/ic.388
Abstract: Purpose: This paper examines the principles of the Institutional Theory in order to increase the understanding of the contractual covenants that Spanish venture capital firms use in their relationship with the portfolio companies.Design/methodology/approach: The study is based on the data obtained by means of a postal survey addressed to the 70 Spanish venture capital firms registered in the ASCRI (Asociación Espa ola de Entidades de Capital Riesgo) in June, 2002, with a response rate of 68.33%. As a theoretical framework we base on the Institutional Theory as a mechanism to understand the venture capital contractual process.Findings: The results show that a large part of the Spanish venture capital contracts are homogeneous. However, between public and private venture capital firms there is some heterogeneity not only in relation to the industry but also within the field in the design of contracts. It might be due to the coercive pressures exerted by the government on public entities.Research Limitations: Although survey data might create potential biases and possible measurement problems, we consider that our sample has large enough coverage of the venture capital industry (68.33%) that, although cautiously, valid conclusions can be drawn.Originality/value: To the best of our knowledge, this study is one of the first empirical contributions analyzing financial contracts of venture capital firms in Spain. A better understanding of covenants included in venture capital contracts can help Spanish firms to understand the particular terms and restraints of venture capitalists before providing capital. Moreover, this paper also has clear benefits for policy makers and venture capitalists.
Develop Venture Capital Industry, Perfect Science and Technology Investment & Financing System in Shenyang  [cached]
Ya-xin ZHANG,Jing-ting MA
Canadian Social Science , 2009,
Abstract: Thriving the development of Venture Capital industry contains great significance in perfecting science & technology investment and financing system and accelerating the development of high-tech industry of Shenyang. Currently, restrained by multiple factors such as scale, quit channels and exterior environment, etc, of Venture Capital , it plays only a limited role in solving the financing difficulty of science & technology enterprises of Shenyang. It shall emphasize on the following points if it is intended to develop and expand the Venture Capital industry in Shenyang, that is, strengthen the role of government Venture Capital organs as models and power house; foster and develop Venture Capital organs in an active way; perfect multi-layered capital market and broaden the quit channel for Venture Capital ; perfect intermediary service system and promote investment efficiency in Venture Capital ; foster the great cultural atmosphere for starting the business, etc. Key words: Science & Technology Financing; Venture Capital ; Capital Market Résumé: La prospérité du développement de l'industrie de capital à risque a une grande importance pour le perfectionnement de l’investissement dans science & technologie et le système de financement et pour l’accélération du développement de l'industrie high-tech de Shenyang. Actuellement, contraint par de multiples facteurs du capital à risque, tels que l'échelle, les mécanisme de retrait et l'environnement extérieur, etc, il ne joue qu'un r le limité dans la résolution des difficultés de financement des entreprises de science & technologie de Shenyang. Il doit mettre l'accent sur les points suivants si on veut développer et promouvoir l'industrie de capital à risque à Shenyang, qui sont, renforcer le r le du gouvernement; favoriser et développer des entreprises de capital à risque de manière active; perfectionner un marché des capitaux multi-couches et les mécanismes de retrait pour le capital à risque; améliorer le système de services intermédiaires et promouvoir l'efficacité des investissements en capital à risque; favoriser l'atmosphère culturelle pour les démarches de création des entreprises, etc. Mots-Clés: Financement pour la Science et la technologie; capital à risqué; marché du capital
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