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The different roles played by venture capital and private equity investors on the investment activity of their portfolio firms

Author

Listed:
  • Fabio Bertoni

    (POLIMI - Politecnico di Milano [Milan])

  • Maria Alejandra Ferrer

    (LUZ - Universidad del Zulia)

  • Pellon José Marti

    (UCM - Universidad Complutense de Madrid = Complutense University of Madrid [Madrid])

Abstract

Venture capital (VC) and private equity (PE) investors play different roles in their portfolio companies. We argue that this will translate in a recognizable difference in the investment sensitivity to cash flows of portfolio companies and its evolution after the first investment round. We hypothesise that VC, thanks to its ability in overcoming asymmetries in information, will entail a reduction in the financial constraints which hampered the growth of investee firms. We predict, instead, a greater dependency of investments to cash flow for PE-backed companies, driven by the renewed interest for growth of their management combined with higher leverage. We find evidence confirming our hypotheses on a large panel of Spanish unlisted firms in low and medium technology sectors, where both VC and PE firms are active.

Suggested Citation

  • Fabio Bertoni & Maria Alejandra Ferrer & Pellon José Marti, 2013. "The different roles played by venture capital and private equity investors on the investment activity of their portfolio firms," Post-Print hal-02312955, HAL.
    • Handle: RePEc:hal:journl:hal-02312955
    DOI: 10.1007/s11187-011-9384-x
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    More about this item

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship

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