Moral Hazard Reduction in Entrepreneurial Financing An application to Profit and Loss Sharing Contracts

ELFAKIR, Adil, LAMRANI ALAOUI, Youssef, TKIOUAT, Mohamed and AMER, Zaid (2020). Moral Hazard Reduction in Entrepreneurial Financing An application to Profit and Loss Sharing Contracts. British Academy of Management Proceedings 2020.

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    Abstract

    In profit and loss sharing contracts, profits are shared according to a specific ratio while losses are shared according to each partner contribution ration in the project’s capital. We aim to reduce entrepreneurial effort shirking in a profit and loss sharing contract involving a VC and an entrepreneur. We use a game theoretic approach and try to find the profit-sharing ratio that would reduce the moral hazard risk of effort shirking. The game theoretic approach allows for the development of a profit-sharing ratio span of negotiation that fulfil both the incentive and participative constraints of the PLS participants

    Item Type: Article
    SWORD Depositor: Symplectic Elements
    Depositing User: Symplectic Elements
    Date Deposited: 19 May 2020 14:13
    Last Modified: 20 May 2020 11:30
    URI: http://shura.shu.ac.uk/id/eprint/26354

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