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Please use this identifier to cite or link to this item: http://hdl.handle.net/2451/26619

Title: An Analysis of Shareholder Agreements
Authors: Chemla, Gilles
Gille, Michel
Ljungqvist, Alexander
Keywords: Shareholder Agreements
Put Options
Call Options
Pre-emption Rights
Catch-up Clauses
Drag-along Rights
Demand Rights
Tag-along Rights
Issue Date: 7-Jan-2002
Series/Report no.: FIN-01-066
Abstract: Shareholder agreements govern the relations among shareholders in privately-held companies, such as joint ventures or venture capital-backed firms. We provide an economic explanation for the use of put and call options, preemption rights, catch-up clauses, drag-along rights, demand rights, and tag-along rights in shareholder agreements. We view these clauses as a response to a problem of dynamic, double moral hazard, whereby the value of the venture depends on ex ante investments and ex post transfers. Contract clauses i) preserve the incentives to make ex ante investments and ii) minimize ex post transfers. We extend our framework to discuss the use of other clauses, such as the option to extend the life of a business alliance.
URI: http://hdl.handle.net/2451/26619
Appears in Collections:Economics Working Papers

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