Provincial Preferences in Private Equity

Financial Markets and Portfolio Management, Vol. 20, pp. 369-398, 2006

Posted: 7 Nov 2006

See all articles by Sofia Johan

Sofia Johan

Florida Atlantic University - Finance; Tilburg Law and Economics Center (TILEC)

Douglas J. Cumming

Florida Atlantic University

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Abstract

This paper identifies a strong tendency for Canadian private equity investors to finance entrepreneurs that reside in the same province. For all types of investors and entrepreneurial firms, in terms of the number of investments (13,729 transactions), 84.42% of investments were intra-provincial. In terms of the total value of these transactions ($20,193,896,909 in 1997 dollars), 61.15% of the investment value was intra-provincial. We provide evidence that both agency costs and information asymmetries systematically give rise to differences in the frequency of inter- versus intra-provincial investments, and compare the importance of agency versus institutional factors leading to home bias.

Keywords: home bias, private equity

JEL Classification: G24, G31, G32, G28, G33, G34, G35, G38

Suggested Citation

Johan, Sofia A. and Cumming, Douglas J., Provincial Preferences in Private Equity. Financial Markets and Portfolio Management, Vol. 20, pp. 369-398, 2006. Available at SSRN: https://ssrn.com/abstract=942509

Sofia A. Johan

Florida Atlantic University - Finance ( email )

777 Glades Rd
Boca Raton, FL 33431
United States

Tilburg Law and Economics Center (TILEC) ( email )

Warandelaan 2
Tilburg, 5000 LE
Netherlands

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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