Law Commons^™

Does Venture Capital Require An Active Stock Market?, Ronald J. Gilson, Bernard S. Black

Faculty Scholarship

The United States has both an active venture capital industry and well-developed stock markets. Japan and Germany have neither. We argue here that this is no accident – that venture capital can flourish especially – and perhaps only – if the venture capitalist can exit from a successful portfolio company through an initial public offering (IPO), which requires an active stock market. Understanding the link between the stock market and the venture capital market requires understanding the contractual arrangements between entrepreneurs and venture capital providers especially the importance of exit by venture capitalists and the opportunity, present only if IPO …

Lessons From Fiascos In Russian Corporate Governance, Merritt B. Fox, Michael Heller

Faculty Scholarship

Bad corporate governance is often invoked to explain poor enterprise performance, but the catch phrase is never precisely defined. Neither its consequences for the real economy, nor its causes in particular countries has been adequately explained. This paper uses Russian enterprise examples to address these open questions in corporate governance theory. We define corporate governance by looking to the economic functions of the firm rather than to any particular set of national corporate laws. Firms exhibit good corporate governance when their managers maximize residuals and, in the case of investor-owned firms, make pro rata distributions to shareholders.

Using this definition, …