40 Pages Posted: 18 May 2010
Date Written: February 1, 2004
We analyze governance with a new 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 provide evidence that cross-country differences in legality, including legal origin and accounting standards, 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 investor board representation of the investor and the use of securities that do not require periodic cash flows prior to exit. We also show country-specific differences exist apart from legal and economic development.
Keywords: Venture Capital, Corporate Governance, Syndication, Entrepreneurial Finance
JEL Classification: G24, G31, G32
Suggested Citation: Suggested Citation
Cumming, Douglas J. and Schmidt, Daniel and Walz, Uwe, Legality and Venture Capital Governance Around the World (February 1, 2004). Journal of Business Venturing, Vol. 25, No. 1, pp. 54-72, 2010. Available at SSRN: https://ssrn.com/abstract=1611366
Review Essay: Public Policy and the Creation of Active Venture Capital Markets and Some Comments on 'Boulevard of Broken Dreams: Why Public Efforts to Boost Entrepreneurship and Venture Capital Have Failed – and What to Do About It,' by Josh Lerner