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Active Financial Intermediation: Evidence on the Role of Organizational Specialization and Human Capital

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  • Laura Bottazzi
  • Marco Da Rin
  • Thomas Hellmann

Abstract

Financial intermediaries can choose the extent to which they want to be active investors, providing valuable services like advice, support and corporate governance. We examine the determinants of the decision to become an active financial intermediary using a hand-collected dataset on European venture capital deals. We find organizational specialization to be a key driver. Venture firms which are independent and focused on venture capital alone get more involved with their companies. The human capital of venture partners is another key driver of active financial intermediation. Venture firms whose partners’ have prior business experience or a scientific education provide more support and governance. These results have implications for prevailing views of financial intermediation, which largely abstract from issues of specialization and human capital.

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Paper provided by IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University in its series Working Papers with number 266.

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Date of creation: 2004
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Handle: RePEc:igi:igierp:266

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Cited by:
  1. Beuselinck, C.A.C. & Manigart, S., 2007. "Financial reporting quality in private equity backed companies: The impact of ownership concentration," Open Access publications from Tilburg University urn:nbn:nl:ui:12-358481, Tilburg University.
  2. Marco Da Rin & Giovanna Nicodano & Alessandro Sembenelli, 2004. "Public Policy and the Creation of Active Venture Capital Markets," Working Papers 270, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
  3. Tereza Tykvová, 2006. "How do investment patterns of independent and captive private equity funds differ? Evidence from Germany," Financial Markets and Portfolio Management, Springer, vol. 20(4), pages 399-418, December.
  4. Cressy, Robert & Munari, Federico & Malipiero, Alessandro, 2007. "Playing to their strengths? Evidence that specialization in the private equity industry confers competitive advantage," Journal of Corporate Finance, Elsevier, vol. 13(4), pages 647-669, September.

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