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The law and finance of venture capital financing in Europe: findings from the RICAFE research project

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  • Da Rin, Marco
  • Hege, Ulrich
  • Llobet, Gerard
  • Walz, Uwe

Abstract

This survey article summarizes the findings of four research projects on the venture capital industry in Europe and the role played by legal institutions and the legal framework. A study on patent litigation insurance argues that insurance can create a level playing field for small innovators, but that compulsory insurance can only be justified as a transitory scheme. The second study argues that intermediaries from countries with a better legal tradition will provide more governance and value added services, even when investing abroad. It also provides supportive empirical evidence based on an extensive questionnaire-study. The third project investigates the relationship between venture investments and a widely used legality index in 39 countries, finding that better laws facilitate faster deal screening and origination, lead to a higher probability of syndication, and also facilitate board representation of the investors. The final study documents a significant performance gap between the European and the US venture capital industry, but argues that the difference can not be attributed to differences in legal origin.

Suggested Citation

  • Da Rin, Marco & Hege, Ulrich & Llobet, Gerard & Walz, Uwe, 2005. "The law and finance of venture capital financing in Europe: findings from the RICAFE research project," MPRA Paper 39552, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:39552
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    1. Berkowitz, Daniel & Pistor, Katharina & Richard, Jean-Francois, 2003. "Economic development, legality, and the transplant effect," European Economic Review, Elsevier, vol. 47(1), pages 165-195, February.
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    Cited by:

    1. Hsu, Po-Hsuan & Huang, Peng & Humphery-Jenner, Mark & Powell, Ronan, 2021. "Cross-border mergers and acquisitions for innovation," Journal of International Money and Finance, Elsevier, vol. 112(C).

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    More about this item

    Keywords

    venture capital; patent litigation; legal system; corporate governance; legality index; performance;
    All these keywords.

    JEL classification:

    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage

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