Download this Paper Open PDF in Browser

Legality and Venture Governance Around the World

38 Pages Posted: 16 Apr 2008 Last revised: 10 Sep 2008

Douglas J. Cumming

York University - Schulich School of Business

Daniel Schmidt

University of Frankfurt, CEPRES Center of Private Equity Research

Uwe Walz

Goethe University Frankfurt - Institute of Economics; Center For Financial Studies (CFS); Goethe University Frankfurt - Research Center SAFE

Date Written: January 1, 2008

Abstract

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

Cumming, Douglas J. and Schmidt, Daniel and Walz, Uwe, Legality and Venture Governance Around the World (January 1, 2008). Journal of Business Venturing, Forthcoming. Available at SSRN: https://ssrn.com/abstract=537243 or http://dx.doi.org/10.2139/ssrn.537243

Douglas J. Cumming (Contact Author)

York University - Schulich School of Business ( email )

4700 Keele Street
Toronto, Ontario M3J 1P3
Canada

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

Daniel Schmidt

University of Frankfurt, CEPRES Center of Private Equity Research ( email )

Grüneburgplatz 1
Frankfurt am Main, 60323
Germany

Uwe Walz

Goethe University Frankfurt - Institute of Economics ( email )

Postfach 81
D-60054 Frankfurt
Germany

Center For Financial Studies (CFS) ( email )

Grüneburgplatz 1
Frankfurt am Main, 60323
Germany

Goethe University Frankfurt - Research Center SAFE ( email )

(http://www.safe-frankfurt.de)
Theodor-W.-Adorno-Platz 3
Frankfurt am Main, 60323
Germany

Paper statistics

Downloads
567
Rank
39,113
Abstract Views
2,231