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Determinants of required return in venture capital investments:A five country study

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  • Philippe Desbrières

    (Université de Bourgogne LATEC/FARGO)

  • Sophie Manigart
  • Koen De Waele
  • Mike Wright
  • Ken Robbie
  • Harry Sapienza
  • Amy Beekman

Abstract

Using two complementary theoretical perspectives, we develop hypotheses regarding the determinants of the return required by venture capitalists and test them on a sample of over 200 venture capital companies (VCCs) located in five countries. Consistent with resource based theory, we find that early stage specialists require a significantly higher return than other VCCs when investing in later stage ventures. Consistent with financial theory, we find that acquisition /buyout specialists require a significantly lower return than other VCCs when investing in expansion companies. Furthermore, in comparison to specialists, highly stage-diversified VCCs require a significantly higher return for early stage investments. Independent VCCs require a higher rate of return than captive or public VCCs. In general, higher required returns are associated with VCCs providing more intensity of involvement, having shorter expected hold-ing period of the investment, and being located in the US or UK (in comparison to those in France, Belgium, and the Netherlands).

Suggested Citation

  • Philippe Desbrières & Sophie Manigart & Koen De Waele & Mike Wright & Ken Robbie & Harry Sapienza & Amy Beekman, 2002. "Determinants of required return in venture capital investments:A five country study," Working Papers CREGO 1020701, Université de Bourgogne - CREGO EA7317 Centre de recherches en gestion des organisations.
    • Handle: RePEc:dij:wpfarg:1020701
    Note: article publié dans Journal of Business Venturing, vol.17, n°4, juillet 2002, p.291-312
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    References listed on IDEAS

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    More about this item

    Keywords

    required return; venture capital; investments;
    All these keywords.

    JEL classification:

    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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