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Legality and Venture Governance Around the World

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Author Info
Douglas Cumming () (University of Alberta School of Business, Edmonton, Alberta, Canada)
Daniel Schmidt () (J.W. Goethe-Universität Frankfurt/Main and CEPRES)
Uwe Walz () (J.W. Goethe-Universität Frankfurt/Main and Center for Financial Studies)
Abstract

We analyze governance with a 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 find that cross-country differences in Legality 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 board representation of the investor. We also show better laws reduce the probability that the investor requires periodic cash flows prior to exit, which is in conjunction with an increased probability of investment in high-tech companies.

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Publisher Info
Paper provided by Center for Financial Studies in its series CFS Working Paper Series with number 2004/17.

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Length: 39 pages
Date of creation: 17 Jan 2004
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Handle: RePEc:cfs:cfswop:wp200417

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Related research
Keywords: Venture Capital Corporate Governance Syndication Entrepreneurial Finance

Find related papers by JEL classification:
G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Investment Policy
G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Capital and Ownership Structure

This paper has been announced in the following NEP Reports:

References listed on IDEAS
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