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Legal jurisdiction, director liability law, and venture capitalists’ equity stakes in Africa

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  • Adongo, Jonathan O.

Abstract

This article empirically investigates whether shareholder protection features of countries’ legal jurisdictions influence portfolio companies’ venture capital and private equity stakes purchased by general partner firms in Africa. Results indicate general partners purchase lower equity stakes in French civil law, relative to Common law systems, when director liability laws are weak and higher equity stakes in the former when laws are stronger. This supports theory arguing firm level monitoring and shareholder protection, measured by director liability laws, are substitutes on the continent. Results also indicate private benefit extraction gains influence general partner monitoring and portfolio company owners’ effort incentives.

Suggested Citation

  • Adongo, Jonathan O., 2017. "Legal jurisdiction, director liability law, and venture capitalists’ equity stakes in Africa," Research in International Business and Finance, Elsevier, vol. 40(C), pages 78-93.
    • Handle: RePEc:eee:riibaf:v:40:y:2017:i:c:p:78-93
    DOI: 10.1016/j.ribaf.2016.12.002
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