1、中文 2390 字， 1165 单词 原文 Independent Directors and Board Control in Venture Finance Material Source:Berkeley Program in Law and Economics,Working Paper Series Aurthor: Brain Broughman Introduction The financing contract between an entreprenur and investor must address the partiesdivergentinterests.Idea
2、lly the contract align their interests across all contingencies.Due to boundendrationality,transactioncosts,and non-verifiable information,however,a complete financing contract is not possibleAghion and Bolton,1992. Instead,the allocation of board seats and other control rights determines who gets t
3、o decide future investment and operating decisions left out of the contract.If one party holds a majority of the board seats it can use this position opportunistically,causing the firm to pursue actions which benefit it at the expense of the firms aggregate welfare. The financial contracting literat
4、ure suggests two partial,butimperfect,solutions to this problem:renegotiationCoase,1960；Grossman and Hart,1986,and state-contingent control(Aghion and Bolton,1992；Dewatripont and Tirole,1994). While there is evidence that private firms sometimes use renegotiation(Broughman and Fried,2007)and state-c
5、ontingent control(Kaplan and Stromberg,2003),both solutions are limited in various respects and neither can fully remove the risk of holdup. In this article,I model an alternative solution to this problem,based on a governance arrangement frequently used in firms financed by venture capitalVC.In a s
6、tudy documenting over 200 rounds of VC financing,Kaplan and Stromberg2003find that a firms VC investors control the board 25%of the time, and the entrepreneurs control the board only 14%of the time.In the remaining firms,61%of their sample,neither the entrepreneurs nor the investors control the firm
7、.Instead,control of the board is shared with third-party independent directors holding the tie-breaking votes.I focus on the incentives created by this form of shared control.To model this arrangement,I consider a board with three directors:oneentrepreneur,oneinvestor,and one independent director. I
8、D-arbitration has been overlooked by the financial contracting literature.The literature treats control as“an indivisible right that can be held at any given time by only one party”Kirilenko,2001.Consequently economic models cannot explain the most commonly observed startup board configuration.The c
9、losest analogy to ID-arbitration in the literature is state-contingent control； however,these are conceptually distinct.State-contingent control determines who gets to decide the firms action,whereas ID-arbitration is a three-party decision-making structure.This distinction is particularly relevant
10、whenever the independent director prefers an action that neither the entrepreneur nor the investor would select if given control.Under this scenario ID-arbitration creates an incentive for compromise that is not present under state-contingent control. I compare the incentives created by entrepreneur
11、 control,investor control,and ID-arbitration.My analysis applies to a variety of important decisions frequently faced by startup firms?whether or when to sell the firm or hire a new CEO,how much to invest in a new technology,etc.In my model,consistent with empirical data(Kaplan and Stromberg,2003),t
12、he allocation of board seats is endogenous to the financing contract (Hermalin and Weisbach,1998；2003).The basic model setup,informational assumptions and conflict between private benefits and monetary returns follow Aghion and Bolton(1992). The primary innovation of this article is to model the fir
13、ms decision-making under ID-arbitration,where the choice of action is the result of deliberation and voting among three directors.I assume a bargaining process similar to final offer arbitrationStevens,1966.The entrepreneur and investor will each propose an action.If they propose the same action the
14、 firm will pursue this strategy.However,if they propose different actions,the independent director must choose between the two proposals. I find that ID-arbitration can lead to the efficient outcome in some circumstances where entrepreneur control is unavailable and investor control would be ineffic
15、ient.Because of the risk of holdup,entrepreneur control may fail to satisfy the investors ex ante participation constraint.Moving to investor control increases the monetary returns that the firm can pledge to the investor,but compromises the projects overall value.The controlling investor will ignor
16、e the entrepreneurs private interests,and the parties may be unable to renegotiate to the efficient outcome because the entrepreneur is wealth constrained (Aghion and Bolton,1992). By contrast,under ID-arbitration neither the entrepreneur nor the investor can unilaterally threaten to pursue their pr
17、eferred action.Instead,they must propose actions that would be endorsed by the independent director.I show,similar to analysis of final offer arbitrationCrawford,1979,that the entrepreneur and investor have an incentive to converge towards the action most preferred by the independent director.Conver
18、gence to the independent directors preferred outcome can reduce holdup by moderating each partys expost threat position.Consequently,ID-arbitration can generate greater monetary returns than entrepreneur control,without exposing the entrepreneur to holdup by the investor. My analysis suggests a hier
19、archy of control rights.Firms should use entrepreneur control whenever possible.In some cases,however,entrepreneur control may not provide enough verifiable revenues to give the investor his required rate of return.When this is the case,firms should first try to use ID-arbitration rather than invest
20、or control.However,in some instances investor control may be necessary,as it may be the only way to pledge sufficient monetary returns to ensure the investors participation. These predictions are consistent with empirical evidence from VC contracts.Kaplan and Stromberg2003,for example,find that VC-b
21、acked firms are more(less) likely to use ID-arbitration relative to entrepreneur controlinvestor controlwhen there is greater uncertainty regarding the projects financial viability,and as additional funds are invested.This data is consistent with my model if we assume,as Kaplan and Stromberg do,that
22、 greater uncertainty increases the likelihood and magnitude of conflicts between the entrepreneur and the investor.Furthermore,data on the appointment of independent directors shows that they are mutually selected by unanimous consentofthe firms entrepreneurs and VC investors(Kaplan and Stromberg,20
23、03；Broughman,2008),helping to ensure that an independent directors interests are not captured by either party. This study relates to the incomplete contracting literature on the optimal allocation of control rights.Grossman and Hart(1986)show that decision rights can affect relation-specific investm
24、ents and should be allocated to minimize underinvestment.Emphasizing a tradeoff between cash flows and private benefits,Aghion and Bolton(1992)find that control should be awarded to the entrepreneur whenever possible；however,investor control may be necessary to satisfy the investors financing constr
25、aint The above papers are complimented by a numberstudies,includingBerglof1994,Hellmann1998,2006,Dessein2005,Kirilenko2001,BlackandGilson1998,Marx1998,Schmidt2003,Yerramilli2006,andGompers1995,which focus on the allocation of control in VC-backed firms.These studies generally treat control as an indivisible right that can be held at any given time by only one party?either the entrepreneur or the VC
