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Legality and venture capital governance around the world

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Author Info

  • Cumming, Douglas
  • Schmidt, Daniel
  • Walz, Uwe

Abstract

We analyze governance with a new dataset on investments of venture capitalists in 3848 portfolio firms in 39 countries from North and South America, Europe and Asia spanning 1971-2003. We provide evidence that cross-country differences in legality, including legal origin and accounting standards, have a significant impact on the governance structure of investments in the VC industry: better laws facilitate faster deal screening and deal origination, a higher probability of syndication and a lower probability of potentially harmful co-investment, and facilitate investor board representation of the investor. We also show that country-specific differences exist apart from legal and economic development.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Business Venturing.

Volume (Year): 25 (2010)
Issue (Month): 1 (January)
Pages: 54-72

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Handle: RePEc:eee:jbvent:v:25:y:2010:i:1:p:54-72

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Web page: http://www.elsevier.com/locate/jbusvent

Related research

Keywords: Venture capital Corporate governance Syndication Entrepreneurial finance;

References

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Citations

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Cited by:
  1. Roland Füss & Denis Schweizer, 2012. "Short and long-term interactions between venture capital returns and the macroeconomy: evidence for the United States," Review of Quantitative Finance and Accounting, Springer, Springer, vol. 38(3), pages 391-410, April.
  2. Li, Yong & Vertinsky, Ilan B. & Li, Jing, 2014. "National distances, international experience, and venture capital investment performance," Journal of Business Venturing, Elsevier, Elsevier, vol. 29(4), pages 471-489.
  3. A. Heughebaert & T. Vanacker & S. Manigart, 2012. "Institutional Frameworks, Venture Capital and the Financing of European New Technology-Based Firms," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium, Ghent University, Faculty of Economics and Business Administration 12/809, Ghent University, Faculty of Economics and Business Administration.
  4. Julia Hirsch & Uwe Walz, 2013. "Why do contracts differ between venture capital types?," Small Business Economics, Springer, Springer, vol. 40(3), pages 511-525, April.
  5. Chortareas, Georgios E. & Girardone, Claudia & Ventouri, Alexia, 2013. "Financial freedom and bank efficiency: Evidence from the European Union," Journal of Banking & Finance, Elsevier, Elsevier, vol. 37(4), pages 1223-1231.
  6. Block, Joern H. & De Vries, Geertjan & Schumann, Jan H. & Sandner, Philipp, 2014. "Trademarks and venture capital valuation," Journal of Business Venturing, Elsevier, Elsevier, vol. 29(4), pages 525-542.
  7. Kerstin Bernoth & Roberta Colavecchio & Magdolna Sass, 2010. "Drivers of Private Equity Investment in CEE and Western European Countries," Discussion Papers of DIW Berlin, DIW Berlin, German Institute for Economic Research 1002, DIW Berlin, German Institute for Economic Research.
  8. Douglas Cumming, 2010. "Public policy and the creation of active venture capital markets," Venture Capital, Taylor & Francis Journals, Taylor & Francis Journals, vol. 13(1), pages 75-94, April.
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  10. Groh, Alexander P. & Liectenstein, Heinrich, 2009. "The first step of the capital flow from institutions to entrepreneurs: The criteria for sorting venture capital funds," IESE Research Papers, IESE Business School D/795, IESE Business School.
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  12. Humphery-Jenner, Mark & Suchard, Jo-Ann, 2013. "Foreign VCs and venture success: Evidence from China," Journal of Corporate Finance, Elsevier, Elsevier, vol. 21(C), pages 16-35.
  13. De Clercq, Dirk & Meuleman, Miguel & Wright, Mike, 2012. "A cross-country investigation of micro-angel investment activity: The roles of new business opportunities and institutions," International Business Review, Elsevier, Elsevier, vol. 21(2), pages 117-129.
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  15. repec:diw:diwfin:diwfin03050 is not listed on IDEAS
  16. Gerasymenko, Violetta & Arthurs, Jonathan D., 2014. "New insights into venture capitalists' activity: IPO and time-to-exit forecast as antecedents of their post-investment involvement," Journal of Business Venturing, Elsevier, Elsevier, vol. 29(3), pages 405-420.
  17. Stefano Bonini & Senem Alkan, 2012. "The political and legal determinants of venture capital investments around the world," Small Business Economics, Springer, Springer, vol. 39(4), pages 997-1016, November.
  18. Achleitner, Ann-Kristin & Engel, Nico & Reiner, Uwe, 2013. "The performance of venture capital investments: Do investors overreact?," Review of Financial Economics, Elsevier, Elsevier, vol. 22(1), pages 20-35.

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