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

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  • Bottazzi, Laura
  • Da Rin, Marco
  • Hellmann, Thomas F

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.

Suggested Citation

  • Bottazzi, Laura & Da Rin, Marco & Hellmann, Thomas F, 2004. "Active Financial Intermediation: Evidence on the Role of Organizational Specialization and Human Capital," CEPR Discussion Papers 4794, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:4794
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    1. Da Rin, Marco & Nicodano, Giovanna & Sembenelli, Alessandro, 2006. "Public policy and the creation of active venture capital markets," Journal of Public Economics, Elsevier, vol. 90(8-9), pages 1699-1723, September.
    2. Mehmet Nar, 2020. "The Relationship Between Human Capital and Financial Development: A Case Study of Turkey," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 11(1), pages 157-170, January.
    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;Swiss Society for Financial Market Research, vol. 20(4), pages 399-418, December.
    4. Christof Beuselinck & Sophie Manigart, 2007. "Financial Reporting Quality in Private Equity Backed Companies: The Impact of Ownership Concentration," Small Business Economics, Springer, vol. 29(3), pages 261-274, October.
    5. Rabail Amna Intisar & Muhammad Rizwan Yaseen & Rakhshanda Kousar & Muhammad Usman & Muhammad Sohail Amjad Makhdum, 2020. "Impact of Trade Openness and Human Capital on Economic Growth: A Comparative Investigation of Asian Countries," Sustainability, MDPI, vol. 12(7), pages 1-19, April.
    6. Eric Nasica & Dominique Torre & Dominique Dufour, 2011. "Syndication in private equity industry: comparing the strategies of independent and captive venture capitalists," Post-Print halshs-00720785, HAL.
    7. 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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    JEL classification:

    • G20 - Financial Economics - - Financial Institutions and Services - - - General

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