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Does Venture Capital Syndication Spur Employment Growth and Shareholder Value? Evidence from German IPO Data

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  • Erik Lehmann

Abstract

This study empirically examines the syndication of equity by multiple venture capitalists in Germany. Following the literature, there are mainly two competing views as to why venture capitalists syndicate investments. First, syndication can be viewed as a means of risk-sharing. Second, venture capitalists may provide important productive resources to firms: capital and information. I test hypotheses based on these two aspects. The results show that the syndication of equity and the number of venture capitalists involved cannot be fully explained by firm characteristics like size, age, or industry affiliation. Although syndicated investments do not differ significantly in stock-market performance, they do show significantly higher growth rates. Copyright Springer 2006

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  • Erik Lehmann, 2006. "Does Venture Capital Syndication Spur Employment Growth and Shareholder Value? Evidence from German IPO Data," Small Business Economics, Springer, vol. 26(5), pages 455-464, June.
    • Handle: RePEc:kap:sbusec:v:26:y:2006:i:5:p:455-464
    DOI: 10.1007/s11187-005-5599-z
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    1. Asif Iqbal Siddiqui & Dora Marinova, 2016. "Funding Liquidity Risk, Syndication Behavior And The Risk Culture Of The Australian Venture Capital Industry," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 64(05), pages 1279-1297, December.
    2. Haizhi Wang & Robert Wuebker & Shu Han & Michael Ensley, 2012. "Strategic alliances by venture capital backed firms: an empirical examination," Small Business Economics, Springer, vol. 38(2), pages 179-196, February.
    3. Jean-michel Sahut & Eric Braune & Frédéric Teulon, 2017. "What drives CVC investments? An Empirical Test of Social Network Theory Predictions," Economics Bulletin, AccessEcon, vol. 37(3), pages 2030-2040.
    4. Ying Sophie Huang & Buhui Qiu & Jiajia Wu & Juan Yao, 2023. "Institutional distance, geographic distance, and Chinese venture capital investment: do networks and trust matter?," Small Business Economics, Springer, vol. 61(4), pages 1795-1844, December.
    5. Asif Siddiqui & Dora Marinova & Amzad Hossain, 2016. "Venture Capital Networks in Australia: Emerging Structure and Behavioural Implications," Journal of Management and Sustainability, Canadian Center of Science and Education, vol. 6(2), pages 21-35, June.
    6. Fabio Bertoni & Massimo Colombo & Anita Quas, 2015. "The patterns of venture capital investment in Europe," Small Business Economics, Springer, vol. 45(3), pages 543-560, October.
    7. Milosevic, Miona, 2018. "Skills or networks? Success and fundraising determinants in a low performing venture capital market," Research Policy, Elsevier, vol. 47(1), pages 49-60.
    8. Mauro Romano & Alessandro Cirillo & Donata Mussolino & Luca Pennacchio, 2019. "CEO career horizons and when to go public: the relationship between risk-taking, speed and CEO power," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 23(1), pages 139-163, March.
    9. Nguyen, Giang & Vu, Le, 2021. "Does venture capital syndication affect mergers and acquisitions?," Journal of Corporate Finance, Elsevier, vol. 67(C).
    10. Tong Liu & Shiyou Qu & Christopher M. Scherpereel, 2020. "The Influence of the Role Positioning of Investment Institutions on the Value of Start-Up Enterprises from the Perspective of Network," Sustainability, MDPI, vol. 12(2), pages 1-19, January.
    11. Thomas Standaert & Sophie Manigart, 2018. "Government as fund-of-fund and VC fund sponsors: effect on employment in portfolio companies," Small Business Economics, Springer, vol. 50(2), pages 357-373, February.
    12. Younghoon Kim & Yeonbae Kim & Jeong‐Dong Lee, 2011. "Corporate Venture Capital and Its Contribution to Intermediate Goods Firms in South Korea," Asian Economic Journal, East Asian Economic Association, vol. 25(3), pages 309-329, September.
    13. Erik E. Lehmann & Nikolaus Seitz & Katharine Wirsching, 2017. "Smart finance for smart places to foster new venture creation," Economia e Politica Industriale: Journal of Industrial and Business Economics, Springer;Associazione Amici di Economia e Politica Industriale, vol. 44(1), pages 51-75, March.
    14. Konstantinos Poulis & Gregorios C. Galanakis & Gregory T. Triantafillou & Efthimios Poulis, 2020. "Value migration: digitalization of shipping as a mechanism of industry dethronement," Journal of Shipping and Trade, Springer, vol. 5(1), pages 1-18, December.
    15. Gu, Jing & Zhang, Fujuan & Xu, Xun & Xue, Chaokai, 2023. "Stay or switch? The impact of venture capitalists' movement across network communities on enterprises’ innovation performance," Technovation, Elsevier, vol. 125(C).

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