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Local Laws and Venture Capital Contracting in Transition Economies: Evidence from Poland

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  • Darek Klonowski

Abstract

This study focuses on the legal structuring of venture capital deals in Poland. Three conclusions are derived. First, owing to significant imperfections in the Polish legal infrastructure, local venture capitalists need to consider how to structure their transactions. This represents a unique feature of venture capital investing in emerging markets. The study confirms the existence of three types of legal structures in venture capital investing (i.e. local deals, offshore deals and complex deals), with offshore deals being the predominant category. Second, local venture capitalists display different preferences for various deal structures based on venture capital firms' characteristics. Third, the placement of venture capitalists' rights varies across different legal documents, with the most pronounced difference being observed in local deals. The study is based on a survey of 64 venture capitalists.

Suggested Citation

  • Darek Klonowski, 2006. "Local Laws and Venture Capital Contracting in Transition Economies: Evidence from Poland," Post-Communist Economies, Taylor & Francis Journals, vol. 18(3), pages 327-343.
  • Handle: RePEc:taf:pocoec:v:18:y:2006:i:3:p:327-343
    DOI: 10.1080/14631370600881929
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    References listed on IDEAS

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    1. Simeon Djankov & Rafael La Porta & Florencio Lopez-de-Silanes & Andrei Shleifer, 2002. "The Regulation of Entry," The Quarterly Journal of Economics, Oxford University Press, vol. 117(1), pages 1-37.
    2. Mike Wright & Judit Karsai & Zbigniew Dudzinski & Jan Morovic, 1999. "Transition and Active Investors: Venture Capital in Hungary, Poland and Slovakia," Post-Communist Economies, Taylor & Francis Journals, vol. 11(1), pages 27-46.
    3. La Porta, Rafael & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert W. Vishny, 1997. " Legal Determinants of External Finance," Journal of Finance, American Finance Association, vol. 52(3), pages 1131-1150, July.
    4. Steven N. Kaplan & Per Strömberg, 2003. "Financial Contracting Theory Meets the Real World: An Empirical Analysis of Venture Capital Contracts," Review of Economic Studies, Oxford University Press, vol. 70(2), pages 281-315.
    5. Douglas Cumming, 2005. "Review Essay: Global Venture Capital Transactions," Venture Capital, Taylor & Francis Journals, vol. 7(2), pages 185-201, January.
    6. Rafael La Porta & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert W. Vishny, 1998. "Law and Finance," Journal of Political Economy, University of Chicago Press, vol. 106(6), pages 1113-1155, December.
    7. Judit Karsai & Mike Wright & Zbigniew Dudzinski & Jan Morovic, 1998. "Screening and valuing venture capital investments: evidence from Hungary, Poland and Slovakia," Entrepreneurship & Regional Development, Taylor & Francis Journals, vol. 10(3), pages 203-224, January.
    8. Judit Karsai & Mike Wright & Zbigniew Dudzinski & Jan Morovic, 1999. "Venture capital in transition economies: the cases of Hungary, Poland and Slovakia," Chapters,in: Management Buy-outs and Venture Capital, chapter 4 Edward Elgar Publishing.
    9. Wojciech Bienkowski, 2002. "Completion of Systemic Transformation Processes in Post-Communist Countries as a Condition for Successful Development of Economic Cooperation," Eastern European Economics, Taylor & Francis Journals, vol. 40(3), pages 51-68, May.
    10. Richard T. Bliss, 1999. "A venture capital model for transitioning economies: The case of Poland," Venture Capital, Taylor & Francis Journals, vol. 1(3), pages 241-257, July.
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