The survival of venture capital backed companies : an analysis of the French case
We analyze the impact of venture capital on firm performance ; more precisely, we investigate whether venture capital adds value to innovative French companies in terms of increasing their survival time. To this end, we use a hand-collected data set based on a sample of 139 French companies that went public at the "Nouveau Marché" between 1996 and 2002 to compare the survival rates of venture capital backed and non-venture capital backed companies. We develop two sets of econometric models to evaluate the factors that a ffect the fate of French initial public offerings. First, we estimate a discrete time duration model to explain the probability of exit. Second, we apply a competing risk model to account for heterogeneity in rm exit (liquidation versus merger/acquisition). Contrary to common wisdom, the estimates show that venture capital backed companies have a lower survival rate than non-venture capital backed companies and have a higher probability of being liquidated than other firms. Our results are comparable to those ob- tained in previous studies on Germany and Belgium which show that receiving venture capital does not improve firm survival.
|Date of creation:||2011|
|Date of revision:|
|Note:||View the original document on HAL open archive server: https://halshs.archives-ouvertes.fr/halshs-00720927|
|Contact details of provider:|| Web page: https://hal.archives-ouvertes.fr/|
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Fried, Vance H. & Bruton, Garry D. & Hisrich, Robert D., 1998. "Strategy and the board of directors in venture capital-backed firms," Journal of Business Venturing, Elsevier, vol. 13(6), pages 493-503, November.
- Gifford, Sharon, 1997. "Limited attention and the role of the venture capitalist," Journal of Business Venturing, Elsevier, vol. 12(6), pages 459-482, November.
- Sapienza, Harry J. & Manigart, Sophie & Vermeir, Wim, 1996. "Venture capitalist governance and value added in four countries," Journal of Business Venturing, Elsevier, vol. 11(6), pages 439-469, November.
- Gompers, Paul A, 1995. " Optimal Investment, Monitoring, and the Staging of Venture Capital," Journal of Finance, American Finance Association, vol. 50(5), pages 1461-89, December.
- Elango, B. & Fried, Vance H. & Hisrich, Robert D. & Polonchek, Amy, 1995. "How venture capital firms differ," Journal of Business Venturing, Elsevier, vol. 10(2), pages 157-179, March.
- Evans, David S., 1986.
"The Relationship Between Firm Growth, Size, and Age: Estimates for 100 Manufacturing Industries,"
86-33, C.V. Starr Center for Applied Economics, New York University.
- Evans, David S, 1987. "The Relationship between Firm Growth, Size, and Age: Estimates for 100 Manufacturing Industries," Journal of Industrial Economics, Wiley Blackwell, vol. 35(4), pages 567-81, June.
- Jerry Coakley & Leon Hadass & Andrew Wood, 2007. "Post-IPO Operating Performance, Venture Capital and the Bubble Years," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 34(9-10), pages 1423-1446.
- Richard E. Caves, 1998. "Industrial Organization and New Findings on the Turnover and Mobility of Firms," Journal of Economic Literature, American Economic Association, vol. 36(4), pages 1947-1982, December.
- Iain M. Cockburn & Stefan Wagner, 2007.
"Patents and the Survival of Internet-related IPOs,"
NBER Working Papers
13146, National Bureau of Economic Research, Inc.
- Megginson, William L & Weiss, Kathleen A, 1991. " Venture Capitalist Certification in Initial Public Offerings," Journal of Finance, American Finance Association, vol. 46(3), pages 879-903, July.
- Martha A. Schary, 1991. "The Probability of Exit," RAND Journal of Economics, The RAND Corporation, vol. 22(3), pages 339-353, Autumn.
- Villalonga, Belen, 2004. "Intangible resources, Tobin's q, and sustainability of performance differences," Journal of Economic Behavior & Organization, Elsevier, vol. 54(2), pages 205-230, June.
- Hellmann, Thomas F. & Puri, Manju, 2000.
"Venture Capital and the Professionalization of Start-up Firms: Empirical Evidence,"
1661, Stanford University, Graduate School of Business.
- Thomas Hellmann & Manju Puri, 2002. "Venture Capital and the Professionalization of Start-Up Firms: Empirical Evidence," Journal of Finance, American Finance Association, vol. 57(1), pages 169-197, 02.
- Sueyoshi, Glenn T, 1995. "A Class of Binary Response Models for Grouped Duration Data," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 10(4), pages 411-31, Oct.-Dec..
- Fama, Eugene F. & French, Kenneth R., 2004. "New lists: Fundamentals and survival rates," Journal of Financial Economics, Elsevier, vol. 73(2), pages 229-269, August.
- Storey, D. J. & Tether, B. S., 1998. "New technology-based firms in the European union: an introduction," Research Policy, Elsevier, vol. 26(9), pages 933-946, April.
- Tjalling van der Goot & Noud van Giersbergen & Michiel Botman, 2009. "What determines the survival of internet IPOs?," Applied Economics, Taylor & Francis Journals, vol. 41(5), pages 547-561.
- Bharat A. Jain & Omesh Kini, 2000. "Does the Presence of Venture Capitalists Improve the Survival Profile of IPO Firms?," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 27(9&10), pages 1139-1183.
- Sahlman, William A., 1990. "The structure and governance of venture-capital organizations," Journal of Financial Economics, Elsevier, vol. 27(2), pages 473-521, October.
- Salim Chahine & Igor Filatotchev & Mike Wright, 2007. "Venture Capitalists, Business Angels, and Performance of Entrepreneurial IPOs in the UK and France," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 34(3-4), pages 505-528.
- Manigart, Sophie & De Waele, Koen & Wright, Mike & Robbie, Ken & Desbrieres, Philippe & Sapienza, Harry J. & Beekman, Amy, 2002.
"Determinants of required return in venture capital investments: a five-country study,"
Journal of Business Venturing,
Elsevier, vol. 17(4), pages 291-312, July.
- 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.
- Klaus Schmidt, 1999.
"Convertible Securities and Venture Capital Finance,"
CESifo Working Paper Series
217, CESifo Group Munich.
- Klaus M. Schmidt, 2003. "Convertible Securities and Venture Capital Finance," Journal of Finance, American Finance Association, vol. 58(3), pages 1139-1166, 06.
- Schmidt, Klaus M., 1999. "Convertible Securities and Venture Capital Finance," CEPR Discussion Papers 2317, C.E.P.R. Discussion Papers.
- Schmidt, Klaus M., 2003. "Convertible Securities and Venture Capital Finance," Munich Reprints in Economics 19769, University of Munich, Department of Economics.
- Joshua Lerner, 1994. "The Syndication of Venture Capital Investments," Financial Management, Financial Management Association, vol. 23(3), Fall.
- Silviano Esteve-Pérez & Amparo Sanchis-Llopis & Juan Sanchis-Llopis, 2010. "A competing risks analysis of firms’ exit," Empirical Economics, Springer, vol. 38(2), pages 281-304, April.
- Admati, Anat R & Pfleiderer, Paul, 1994. " Robust Financial Contracting and the Role of Venture Capitalists," Journal of Finance, American Finance Association, vol. 49(2), pages 371-402, June.
- Baum, Joel A. C. & Silverman, Brian S., 2004. "Picking winners or building them? Alliance, intellectual, and human capital as selection criteria in venture financing and performance of biotechnology startups," Journal of Business Venturing, Elsevier, vol. 19(3), pages 411-436, May.
- Sapienza, Harry J., 1992. "When do venture capitalists add value?," Journal of Business Venturing, Elsevier, vol. 7(1), pages 9-27, January.
- Raphael Amit & Lawrence Glosten & Eitan Muller, 1990. "Entrepreneurial Ability, Venture Investments, and Risk Sharing," Management Science, INFORMS, vol. 36(10), pages 1233-1246, October.
- Ruhnka, John C. & Feldman, Howard D. & Dean, Thomas J., 1992. "The "living dead" phenomenon in venture capital investments," Journal of Business Venturing, Elsevier, vol. 7(2), pages 137-155, March.
- Iftekhar Hasan & Haizhi Wang, 2008. "The US bankruptcy law and private equity financing: empirical evidence," Small Business Economics, Springer, vol. 31(1), pages 5-19, June.
When requesting a correction, please mention this item's handle: RePEc:hal:wpaper:halshs-00720927. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (CCSD)
If references are entirely missing, you can add them using this form.