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Empirical analysis of Hungarian firms according to venture capital investment criteria

Author

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  • Judit Edit FUTÓ

    (University of Debrecen, Hungary)

Abstract

Over the past decade the venture capital industry has become more and more prominent, not just on a global level, but in Hungary, too. Thanks to the JEREMIE Program a large number of new venture capital firms are located in our country, and therefore an investment wave has started. The aim of the paper is to sort micro- and small sized enterprises in terms of how appropriate is a venture capital financing. The main topic of the paper relates to the selection of firms for venture capital investment; therefore, in the first part of the study we briefly summarize a general venture capital investment process, highlighting both the selection process and the criteria used for selection. Then we propose 3 indexes (trustworthiness index, openness index, investment index), which we have created to help venture capitalists to decide whether the targeted enterprises are appropriate for them, or not. In the main part of the paper we provide a classification of micro- and small sized Hungarian firms based on my own survey, and we analyze what kind of relationship exists between the proposed indexes and the type of the classified firms. The result of the classification is that we identify four main firm types and, based on statistical tests, it can be said that there is no significant relationship between the trustworthiness index and the clusters, but that there are between the two other indexes and the clusters.

Suggested Citation

  • Judit Edit FUTÓ, 2016. "Empirical analysis of Hungarian firms according to venture capital investment criteria," Timisoara Journal of Economics and Business, West University of Timisoara, Romania, Faculty of Economics and Business Administration, vol. 9(1), pages 16-32, June.
    • Handle: RePEc:wun:timjeb:tjeb:v09:y2016:i01:a02
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    References listed on IDEAS

    as
    1. Zacharakis, Andrew L. & Meyer, G. Dale, 1998. "A lack of insight: do venture capitalists really understand their own decision process?," Journal of Business Venturing, Elsevier, vol. 13(1), pages 57-76, January.
    2. Cumming, Douglas & Schmidt, Daniel & Walz, Uwe, 2010. "Legality and venture capital governance around the world," Journal of Business Venturing, Elsevier, vol. 25(1), pages 54-72, January.
    3. Vance H. Fried & Robert D. Hisrich, 1994. "Toward a Model of Venture Capital Investment Decision Making," Financial Management, Financial Management Association, vol. 23(3), Fall.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Sventure capital; institutional investors; firms; selection criteria; cluster analysis.;
    All these keywords.

    JEL classification:

    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • M1 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration

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