The Law and Finance of Venture Capital Financing in Europe: Findings from the RICAFE Research Project
Marco Da Rin
Bocconi University - IGIER - Innocenzo Gasparini Institute for Economic Research; Tilburg University - Department of Finance; Tilburg Law and Economics Center (TILEC); European Corporate Governance Institute (ECGI)
HEC Paris - Finance Department; European Corporate Governance Institute (ECGI)
Centre for Monetary and Financial Studies (CEMFI)
Goethe University Frankfurt - Institute of Economics
European Business Organization Law Review (EBOR), Vol. 7, 2006
This survey article summarises 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 thirty-nine 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.
Accepted Paper Series
Date posted: February 19, 2007
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