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Legality and venture governance around the world

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  • Cumming, Douglas
  • Schmidt, Daniel
  • Walz, Uwe

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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Bibliographic Info

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

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Date of creation: 2004
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Handle: RePEc:zbw:cfswop:200417

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Related research

Keywords: Venture Capital; Corporate Governance; Syndication; Entrepreneurial Finance;

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References

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Citations

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Cited by:
  1. Cumming, Douglas & Johan, Sofia Atiqah binti, 2008. "Preplanned exit strategies in venture capital," European Economic Review, Elsevier, Elsevier, vol. 52(7), pages 1209-1241, October.
  2. Tereza Tykvová, 2006. "How do investment patterns of independent and captive private equity funds differ? Evidence from Germany," Financial Markets and Portfolio Management, Springer, Springer, vol. 20(4), pages 399-418, December.
  3. Cumming, Douglas J., 2005. "Capital structure in venture finance," Journal of Corporate Finance, Elsevier, Elsevier, vol. 11(3), pages 550-585, June.
  4. Cumming, Douglas J., 2005. "Agency costs, institutions, learning, and taxation in venture capital contracting," Journal of Business Venturing, Elsevier, vol. 20(5), pages 573-622, September.
  5. Cumming, Douglas & Fleming, Grant & Schwienbacher, Armin, 2006. "Legality and venture capital exits," Journal of Corporate Finance, Elsevier, Elsevier, vol. 12(2), pages 214-245, January.
  6. Cumming, Douglas & Siegel, Donald S. & Wright, Mike, 2007. "Private equity, leveraged buyouts and governance," Journal of Corporate Finance, Elsevier, Elsevier, vol. 13(4), pages 439-460, September.

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