Legality and Venture Governance Around the World
38 Pages Posted: 16 Apr 2008 Last revised: 10 Sep 2008
Date Written: January 1, 2008
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
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