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Risk-Seeking Corporate Governance

Reynolds Holding

Founders may be reluctant to take on so much risk. Founders typically invest a large percentage of their human and financial capital into their startups and consequently are unable to diversify firm-specific risk. In our model, VCs address the divergence in risk preference by striking an implicit bargain with founders.

Finance 45
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Compulsion No, Opportunity Yes in the Delaware Law of Externalities

Reynolds Holding

Portfolio Theory and the Capital Asset Pricing Model , in Principles of Corporate Finance, 198, 198213 (13th ed. Black, The Law and Finance of Corporate Acquisitions, 101, 101134 (2d ed. Controllers may limit managerial agency costs, but their self-interest produces so-called controlling shareholder agency costs. [2] Brealey et al.,