Financial Intermediaries, Ownership Structure and the Provision of Venture Capital to Smes: Evidence from Japan
46 Pages Posted: 19 Jul 2005 Last revised: 11 Sep 2008
Date Written: May 3, 2005
This paper examines how the provision of venture capital to small and medium sized businesses (SMEs) is influenced by the ownership structure of the venture capital provider. We introduce a new and unique dataset from the Japanese venture capital market, comprising data on investment and venture capital activities of 127 Japanese venture capital funds. The data allows us to provide a direct comparison of the behaviour of individual owner-manager venture capitalists versus financial intermediation (e.g. bank's venture capital divisions). The data indicate owner-manager venture capitalists (financial disintermediation) give rise to much smaller portfolios of SMEs and more advice to entrepreneurs. Across the scope of different financial intermediation structures including banks, life insurance companies, securities firms, corporations and government bodies, there are further differences in the provision of governance and value-added advice provided to SMEs. Also, the data indicate US-affiliated funds in Japan are more likely to have smaller portfolios and tend to provide more advice to SMEs.
Keywords: Financial Intermediation, Ownership Structure, Private Equity
JEL Classification: G24, G28, G31, G32, G35
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