Covenants in Venture Capital Contracts
研究风险投资合同中契约条款的作用，发现契约用于解决优先股债务特征引发的利益冲突，合同固定收益越高，契约数量越多。
This paper studies how covenants are included in contracts between venture capitalists (VCs) and entrepreneurs. I show that VCs hold covenanted veto rights even though they are shareholders who have access to other powerful governance solutions. Unlike bank loans and bonds, venture capital (VC) contracts exhibit considerable variation in their contractual designs. I exploit this variation to confirm the argument that covenants are in place to overcome a conflict of interest that arises from debt-like contractual features of a venture capitalist's preferred stock. In particular, I find that contracts with higher fixed payoffs include 1.6 more covenants than do contracts with lower fixed payoffs. Similarly, VC contracts with no VC board majority requirement include 0.6 more covenants than do contracts that require a VC board majority. Covenants are also more common with older companies and when fewer VCs invest in a round. My findings contribute to both the debt covenant literature and the entrepreneurial finance literature. This paper was accepted by Brad Barber, finance.