nep-acc New Economics Papers
on Accounting
Issue of 2005‒07‒18
one paper chosen by
Bernardo Batiz-Lazo
Bristol Business School

  1. Legality and Venture Governance Around the World By Douglas Cumming; Daniel Schmidt; Uwe Walz

  1. By: Douglas Cumming (University of Alberta School of Business, Edmonton, Alberta, Canada); Daniel Schmidt (J.W. Goethe-Universität Frankfurt/Main and CEPRES); Uwe Walz (J.W. Goethe-Universität Frankfurt/Main and Center for Financial Studies)
    Abstract: We analyze governance with a dataset on investments of venture capitalists in 3848 portfolio firms in 39 countries from North and South America, Europe and Asia spanning 1971-2003. We find that cross-country differences in Legality have a significant impact on the governance structure of investments in the VC industry: better laws facilitate faster deal screening and deal origination, a higher probability of syndication and a lower probability of potentially harmful co-investment, and facilitate board representation of the investor. We also show better laws reduce the probability that the investor requires periodic cash flows prior to exit, which is in conjunction with an increased probability of investment in high-tech companies.
    Keywords: Venture Capital, Corporate Governance, Syndication, Entrepreneurial Finance
    JEL: G24 G31 G32
    Date: 2004–01–17

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