Abstract

http://ssrn.com/abstract=323821
 
 

References (62)



 
 

Citations (26)



 


 



Crowding Out Private Equity: Canadian Evidence


Douglas J. Cumming


York University - Schulich School of Business

Jeffrey G. MacIntosh


University of Toronto - Faculty of Law


Journal of Business Venturing, Vol. 21, pp. 569-609, 2006

Abstract:     
In this paper, we examine a Canadian tax-driven vehicle known as the Labour Sponsored Venture Capital Corporation (LSVCC). As a theoretical matter, we suggest that the LSVCCs can be expected to have higher agency costs and lower profitability than private venture capital funds. We present data that are consistent with this view. The central question that we analyze, however, is whether the tax advantages conferred on LSVCCs have resulted in LSVCCs crowding out, or displacing other types of venture capital funds. Empirical analysis of our data (which covers the 1977-2001 period) is highly consistent with crowding out. The data suggest that crowding out has been sufficiently energetic as to lead to a reduction in the aggregate pool of venture capital in Canada, frusterating one of the key governmental goals underlying the LSVCC programs; namely, the expansion of the aggregate pool of capital. In the course of our analysis, we confirm the importance of macroeconomic factors (the performance of the stock market, real interest rates, and changes in real gross domestic product) in affecting the supply of and demand for venture capital. We also generate evidence that is consistent with the proposition that entrepreneurs in the market for venture capital prefer to incorporate their business federally, rather than provincially.

Number of Pages in PDF File: 48

JEL Classification: G24, G28, G32, G38, K22

Accepted Paper Series


Download This Paper

Date posted: September 25, 2002  

Suggested Citation

Cumming, Douglas J. and MacIntosh, Jeffrey G., Crowding Out Private Equity: Canadian Evidence. Journal of Business Venturing, Vol. 21, pp. 569-609, 2006. Available at SSRN: http://ssrn.com/abstract=323821 or http://dx.doi.org/10.2139/ssrn.323821

Contact Information

Douglas J. Cumming (Contact Author)
York University - Schulich School of Business ( email )
4700 Keele Street
Toronto, Ontario M3J 1P3
Canada
HOME PAGE: http://www.venturecapitalprivateequitycontracting.com/
Jeffrey G. Macintosh
University of Toronto - Faculty of Law ( email )
78 and 84 Queen's Park
Toronto, Ontario M5S 2C5
Canada
416-978-5795 (Phone)
416-978-2648 (Fax)
Feedback to SSRN


Paper statistics
Abstract Views: 3,418
Downloads: 704
Download Rank: 19,104
References:  62
Citations:  26
Paper comments
No comments have been made on this paper

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo4 in 0.234 seconds