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Informed Capital in a Hostile Environment: The Case of Relational Investors in Germany

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Author Info
Dorothea Schäfer
Dirk Schilder

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Abstract

Informed capital is a crucial ingredient to a well-functioning market for start-up finance, especially in times of difficult market conditions. For bank-based systems, the question regarding which investors actually supply informed capital has not yet been answered. To fill this gap, we conduct a survey among German suppliers of start-up finance. We find significant differences between the investors which are linked to banks and those financiers which are not. Although, the bankrelated group, including public equity suppliers, delivers some sort of informed capital, venture capital companies and Business Angels are the key providers of informed capital in the German market for start-up finance.

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File URL: http://www.diw.de/documents/publikationen/73/diw_01.c.43978.de/dp549.pdf
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Paper provided by DIW Berlin, German Institute for Economic Research in its series Discussion Papers of DIW Berlin with number 549.

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Length: 28 p.
Date of creation: 2006
Date of revision:
Handle: RePEc:diw:diwwpp:dp549

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Related research
Keywords: Informed capital; Start-up financing; Venture capital; Banks; Information;

Find related papers by JEL classification:
G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Mortgages
G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
D21 - Microeconomics - - Production and Organizations - - - Firm Behavior
M13 - Business Administration and Business Economics; Marketing; Accounting - - Business Administration - - - New Firms; Startups
O16 - Economic Development, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Lerner, Josh, 1995. " Venture Capitalists and the Oversight of Private Firms," Journal of Finance, American Finance Association, vol. 50(1), pages 301-18, March. [Downloadable!] (restricted)
  2. De Clercq, Dirk & Sapienza, Harry J., 2006. "Effects of relational capital and commitment on venture capitalists' perception of portfolio company performance," Journal of Business Venturing, Elsevier, vol. 21(3), pages 326-347, May. [Downloadable!] (restricted)
  3. Thomas Hellmann & Manju Puri, 2002. "Venture Capital and the Professionalization of Start-Up Firms: Empirical Evidence," Journal of Finance, American Finance Association, vol. 57(1), pages 169-197, 02. [Downloadable!] (restricted)
    Other versions:
  4. Erik Lehmann & Neuberger, Doris, 2000. "Do Lending Relationships Matter? Evidence from Bank Survey Data in Germany," CoFE Discussion Paper 00-04, Center of Finance and Econometrics, University of Konstanz. [Downloadable!]
    Other versions:
  5. 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. [Downloadable!] (restricted)
  6. Sapienza, Harry J., 1992. "When do venture capitalists add value?," Journal of Business Venturing, Elsevier, vol. 7(1), pages 9-27, January. [Downloadable!] (restricted)
  7. Boot, Arnoud W. A., 2000. "Relationship Banking: What Do We Know?," Journal of Financial Intermediation, Elsevier, vol. 9(1), pages 7-25, January. [Downloadable!] (restricted)
  8. Manove, Michael & Padilla, A Jorge & Pagano, Marco, 2001. "Collateral versus Project Screening: A Model of Lazy Banks," RAND Journal of Economics, The RAND Corporation, vol. 32(4), pages 726-44, Winter.
  9. Gupta, Anil K. & Sapienza, Harry J., 1992. "Determinants of venture capital firms' preferences regarding the industry diversity and geographic scope of their investments," Journal of Business Venturing, Elsevier, vol. 7(5), pages 347-362, September. [Downloadable!] (restricted)
  10. Sapienza, Harry J. & Manigart, Sophie & Vermeir, Wim, 1996. "Venture capitalist governance and value added in four countries," Journal of Business Venturing, Elsevier, vol. 11(6), pages 439-469, November. [Downloadable!] (restricted)
  11. Peter Sunley & Britta Klagge & Christian Berndt & Ron Martin, 2005. "Venture capital programmes in the UK and Germany: In what sense regional policies?," Regional Studies, Taylor and Francis Journals, vol. 39(2), pages 255-273, April. [Downloadable!] (restricted)
  12. Ralf Elsas & Jan Pieter Krahnen, 2003. "Universal Banks and Relationships with Firms," CFS Working Paper Series 2003/20, Center for Financial Studies. [Downloadable!]
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Terttu Luukkonen & Mari Maunula, 2007. "Non-financial Value-added of Venture Capital: A Comparative Study of Different Venture Capital Investors," Discussion Papers 1067, The Research Institute of the Finnish Economy. [Downloadable!]
  2. Terttu Luukkonen, 2007. "Understanding Strategies of the Venture Capital Investors in Helping Their Portfolio Firms to Become International," Discussion Papers 1099, The Research Institute of the Finnish Economy. [Downloadable!]
  3. Terttu Luukkonen & Mari Maunula, 2006. "`Coaching´ Small Biotech Companies into Success: The Value-adding Function of VC," Discussion Papers 1032, The Research Institute of the Finnish Economy. [Downloadable!]
  4. Terttu Luukkonen, 2008. "Different Types of Venture Capital Investors and Value-added to High-Tech Portfolio Firms," Discussion Papers 1149, The Research Institute of the Finnish Economy. [Downloadable!]
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