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Full-Text Articles in Law
The Importance Of "Money", Kathryn Judge
The Importance Of "Money", Kathryn Judge
Faculty Scholarship
In a provocative new book, The Money Problem: Rethinking Financial Regulation, Professor Morgan Ricks argues that the government should reclaim control over money creation. Money, Ricks argues, is not just the cash in your pocket or the balance in your checking account. Instead, at least for purposes of financial stability policy, money is best equated with short-term debt. For most of the twentieth century, such debt was issued primarily by regulated commercial banks and insured by the Federal Deposit Insurance Corporation (FDIC), resulting in a fairly stable financial system. As a result of financial innovation, however, much of today's short-term …
Understanding Venture Capital Structure: A Tax Explanation For Convertible Preferred Stock, Ronald J. Gilson, David M. Schizer
Understanding Venture Capital Structure: A Tax Explanation For Convertible Preferred Stock, Ronald J. Gilson, David M. Schizer
Faculty Scholarship
The capital structures of venture capital-backed U.S. companies share a remarkable commonality: overwhelmingly, venture capitalists make their investments through convertible preferred stock. Not surprisingly, much of the academic literature on venture capital has sought to explain this peculiar pattern. Financial economists have developed models showing, for example, that convertible securities efficiently allocate control between the investor and entrepreneur,signal the entrepreneur's talent and motivation, and align the incentives of entrepreneurs and venture capitalists.
In this Article, we examine the influence of a more mundane factor on venture capital structure: tax law. Portfolio companies issue convertible preferred stock to achieve more favorable …