Government as a Source of Capital for Entrepreneurs: Evidence from Entrepreneurial Exits

42 Pages Posted: 16 Apr 2016 Last revised: 30 Aug 2018

See all articles by Douglas J. Cumming

Douglas J. Cumming

Florida Atlantic University

April M. Knill

Florida State University College of Business; Florida State University - College of Law

Kelsey Syvrud

Florida State University; University of South Florida - Department of Finance

Date Written: April 14, 2016

Abstract

We examine the impact of government ownership on venture-backed private firm exits spanning 50 countries over the years 1990-2010. The data examined indicate that, relative to deals in which the investor base is purely nongovernment, private firms that have government ownership have higher dollar exit values. Subsample analysis on initial public offerings (IPOs) and mergers/acquisitions (M&A) shows that IPOs drive these results. The evidence is consistent with the view that while government may be inefficient, there is potential value for an IPO firm. The results suggest that the most important source of this benefit for IPOs appears to be access to capital when/where markets are experiencing constraints. Results remain after various checks for endogeneity and robustness are undertaken.

Keywords: Venture capital, government ownership, IPO, Acquisition, Valuation

JEL Classification: E6, G2, K2

Suggested Citation

Cumming, Douglas J. and Knill, April M. and Syvrud, Kelsey, Government as a Source of Capital for Entrepreneurs: Evidence from Entrepreneurial Exits (April 14, 2016). Available at SSRN: https://ssrn.com/abstract=2764927 or http://dx.doi.org/10.2139/ssrn.2764927

Douglas J. Cumming

Florida Atlantic University ( email )

777 Glades Rd
Boca Raton, FL 33431
United States

HOME PAGE: http://booksite.elsevier.com/9780124095373/

April M. Knill (Contact Author)

Florida State University College of Business ( email )

Tallahassee, FL 32306-1042
United States
(850) 644-2047 (Phone)

Florida State University - College of Law ( email )

425 W. Jefferson Street
Tallahassee, FL 32306
United States

Kelsey Syvrud

Florida State University ( email )

Tallahasse, FL 32306
United States

University of South Florida - Department of Finance ( email )

Tampa, FL 33620-5500
United States

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