United States Venture Capital Contracting: Foreign Securities

41 Pages Posted: 25 Oct 2001 Last revised: 11 Sep 2008

Abstract

U.S. venture capital financings of U.S. entrepreneurial firms with up to 213 observations is consistent with the proposition that convertible preferred equity is the optimal form of venture capital finance. This paper introduces new evidence from 208 U.S. venture capital financings of Canadian entrepreneurial firms. In contrast to U.S. venture capital investments in U.S. entrepreneurial firms, U.S. venture capitalists finance Canadian entrepreneurial firms with a variety of forms of finance. The differences between domestic and international U.S. venture capitalist financing structures are not attributable to differences in the definition of the term 'venture capital'. The data point to the importance of institutional determinants of venture capitalist capital structures within the U.S. and abroad. Among other things, the data indicate that U.S. venture capitalists often do not choose convertible preferred shares in the absence of tax considerations in favour of that financing vehicle.

Keywords: Venture Capital, Capital Structure, Financial Contracts, Regulation

JEL Classification: G24, G31, G32, G33, G34, G35

Suggested Citation

Cumming, Douglas J., United States Venture Capital Contracting: Foreign Securities. Advances in Financial Economics, Vol. 12, pp. 405-444, 2007. Available at SSRN: https://ssrn.com/abstract=288111 or http://dx.doi.org/10.2139/ssrn.288111

Douglas J. Cumming (Contact Author)

Florida Atlantic University ( email )

777 Glades Rd
Boca Raton, FL 33431
United States

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

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