Venture Capital Investment Duration in Canada and the United States
Jeffrey G. MacIntosh
University of Toronto - Faculty of Law
Douglas J. Cumming
York University - Schulich School of Business
Journal of Multinational Financial Management, Vol. 11, December 2001
This paper considers efficient venture capital investment duration for different types of entrepreneurial firms so that on exit information asymmetries between the venture capitalist (as seller) and the new owners of the investment are minimized, and capital gains maximized. We hypothesize that a number of factors are likely to affect investment duration, and our empirical tests confirm the statistical significance of some of these variables (stage of firm at first investment, capital available to the venture capital industry, whether the exit was preplanned, whether the exit was made in response to an unsolicited offer). However, the fit between our theoretical model and the data is stronger in the United States than in Canada, offering evidence in support of the view that Canadian and U.S. venture capital markets are far from fully integrated.
JEL Classification: G24, G28, G32, G38, K22
Date posted: January 18, 2001
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