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The Determinants of Venture Capital in Europe - Evidence Across Countries

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  • Elisabete Gomes Santana Felix

    ()
    (Universidade de Evora,Departamento de Gestao)

  • Cesaltina Pires

    ()
    (Universidade de Evora,Departamento de Gestao)

  • Mohamed Azzim Gulamhussenb

    ()
    (Instituto Superior de Ciencias do Trabalho e da Empresa, Departamento de Financas e Contabilidade)

Abstract

This article analyzes the determinants of the European venture capital market, extending the equilibrium model from Jeng and Wells (2000). Our empirical model includes many of the determinants already tested in previous studies. In addition, we test whether the unemployment rate, the trade sale divestment and the market-to-book ratio are important factors in explaining venture capital. We use aggregated data from the European venture capital market as well as macroeconomic data, to estimate panel data models, with fixed and random effects. The random effects models revealed to be the most adequate. Our results confirm the importance of some of the already known factors and show that the unemployment rate and trade sale divestments are important determinants in the European venture capital market.

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Bibliographic Info

Paper provided by University of Evora, CEFAGE-UE (Portugal) in its series CEFAGE-UE Working Papers with number 2007_01.

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Length: 32 pages
Date of creation: 2007
Date of revision:
Handle: RePEc:cfe:wpcefa:2007_01

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Keywords: Venture capital; Europe; Venture capital determinants; IPO; Trade sale; Write-off; Unemployment rate;

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References

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  1. Da Rin, M. & Nicodano, G. & Sembenelli, A., 2006. "Public policy and the creation of active venture capital markets," Open Access publications from Tilburg University urn:nbn:nl:ui:12-192935, Tilburg University.
  2. Schertler, Andrea, 2003. "Driving Forces of Venture Capital Investments in Europe: A Dynamic Panel Data Analysis," EIFC - Technology and Finance Working Papers 27, United Nations University, Institute for New Technologies.
  3. Paul Gompers & Josh Lerner, 1998. "Conflict of Interest in the Issuance of Public Securities: Evidence from Venture Capital," NBER Working Papers 6847, National Bureau of Economic Research, Inc.
  4. Bill Francis & Iftekhar Hasan, 2001. "The Underpricing of Venture and Nonventure Capital IPOs: An Empirical Investigation," Journal of Financial Services Research, Springer, vol. 19(2), pages 99-113, April.
  5. Gompers, Paul A., 1996. "Grandstanding in the venture capital industry," Journal of Financial Economics, Elsevier, vol. 42(1), pages 133-156, September.
  6. Megginson, William L & Weiss, Kathleen A, 1991. " Venture Capitalist Certification in Initial Public Offerings," Journal of Finance, American Finance Association, vol. 46(3), pages 879-903, July.
  7. Groh, Alexander Peter & von Liechtenstein, Heinrich & Lieser, Karsten, 2010. "The European Venture Capital and Private Equity country attractiveness indices," Journal of Corporate Finance, Elsevier, vol. 16(2), pages 205-224, April.
  8. Paul Gompers & Josh Lerner, 1998. "Venture Capital Distributions: Short-Run and Long-Run Reactions," Journal of Finance, American Finance Association, vol. 53(6), pages 2161-2183, December.
  9. Andrea Schertler, 2005. "European venture capital markets: fund providers and investment characteristics," Applied Financial Economics, Taylor & Francis Journals, vol. 15(6), pages 367-380.
  10. Brav, Alon & Gompers, Paul A, 1997. " Myth or Reality? The Long-Run Underperformance of Initial Public Offerings: Evidence from Venture and Nonventure Capital-Backed Companies," Journal of Finance, American Finance Association, vol. 52(5), pages 1791-1821, December.
  11. Jeng, Leslie A. & Wells, Philippe C., 2000. "The determinants of venture capital funding: evidence across countries," Journal of Corporate Finance, Elsevier, vol. 6(3), pages 241-289, September.
  12. Black, Bernard S. & Gilson, Ronald J., 1998. "Venture capital and the structure of capital markets: banks versus stock markets," Journal of Financial Economics, Elsevier, vol. 47(3), pages 243-277, March.
  13. Gompers, Paul A, 1995. " Optimal Investment, Monitoring, and the Staging of Venture Capital," Journal of Finance, American Finance Association, vol. 50(5), pages 1461-89, December.
  14. Audretsch, David B & Acs, Zoltan J, 1994. " New-Firm Startups, Technology, and Macroeconomic Fluctuations," Small Business Economics, Springer, vol. 6(6), pages 439-49, December.
  15. Barry, Christopher B. & Muscarella, Chris J. & Peavy, John III & Vetsuypens, Michael R., 1990. "The role of venture capital in the creation of public companies*1: Evidence from the going-public process," Journal of Financial Economics, Elsevier, vol. 27(2), pages 447-471, October.
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Cited by:
  1. Kraeussl, Roman & Krause, Stefan, 2010. "Are particular industries more likely to succeed? A comparative analysis of VC investment in the US and Europe," CFS Working Paper Series 2010/02, Center for Financial Studies (CFS).
  2. Kraeussl, R. & Krause, S., 2011. "Has Europe Been Catching Up? An Industry Level Analysis of Venture Capital Success over 1985 - 2009," Working papers 327, Banque de France.
  3. Francesco Bogliacino & Matteo Lucchese, 2011. "Access to finance for innovation: the role of venture capital and the stock market," ECONOMIA E POLITICA INDUSTRIALE, FrancoAngeli Editore, vol. 2011(4), pages 165-183.
  4. Roman Kraussl & Stefan Krause, 2013. "Has Europe Been Catching Up? An Industry Level Analysis of Venture Capital Success over 1985-2009," CREA Discussion Paper Series 13-6, Center for Research in Economic Analysis, University of Luxembourg.

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