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The determinants of venture capital in Europe - evidence across countries

Author

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  • Elisabete Gomes Santana Félix

    (Assistant Professor, University of Évora and CEFAGE-UÉ)

  • Cesaltina Maria Pacheco Pires

    (University of Évora, Department of Economics and CEFAGE)

Abstract

This article analyzes the determinants of the European venture capital market, extending the equilibrium model from Jeng and Wells (2000). Our empirical model includes many of the determinants already tested in previous studies. In addition, we test whether the unemployment rate, the trade sale divestment and the market-to-book ratio are important factors in explaining venture capital. We use aggregated data from the European venture capital market as well as macroeconomic data, to estimate panel data models, with fixed and random effects. The random effects models revealed to be the most adequate. Our results confirm the importance of some of the already known factors and show that the unemployment rate and trade sale divestments are important determinants in the European venture capital market.

Suggested Citation

  • Elisabete Gomes Santana Félix & Cesaltina Maria Pacheco Pires, 2007. "The determinants of venture capital in Europe - evidence across countries," CEFAGE-UE Working Papers 2007_01, University of Evora, CEFAGE-UE (Portugal).
    • Handle: RePEc:cfe:wpcefa:2007_01
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    as
    1. Ari Hyytinen & Otto Toivanen, 2003. "Asymmetric Information and the Market Structure of the Venture Capital Industry," Journal of Financial Services Research, Springer;Western Finance Association, vol. 23(3), pages 241-249, June.
    2. Cumming, Douglas J. & MacIntosh, Jeffrey G., 2003. "A cross-country comparison of full and partial venture capital exits," Journal of Banking & Finance, Elsevier, vol. 27(3), pages 511-548, March.
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    5. Gompers, Paul & Lerner, Josh, 1999. "Conflict of Interest in the Issuance of Public Securities: Evidence from Venture Capital," Journal of Law and Economics, University of Chicago Press, vol. 42(1), pages 1-28, April.
    6. James M. Poterba, 1989. "Venture Capital and Capital Gains Taxation," NBER Chapters, in: Tax Policy and the Economy, Volume 3, pages 47-68, National Bureau of Economic Research, Inc.
    7. Schertler, Andrea, 2003. "Driving Forces of Venture Capital Investments in Europe: A Dynamic Panel Data Analysis," Kiel Working Papers 1172, Kiel Institute for the World Economy (IfW Kiel).
    8. Gompers, Paul A, 1995. "Optimal Investment, Monitoring, and the Staging of Venture Capital," Journal of Finance, American Finance Association, vol. 50(5), pages 1461-1489, December.
    9. Barry, Christopher B. & Muscarella, Chris J. & Peavy, John III & Vetsuypens, Michael R., 1990. "The role of venture capital in the creation of public companies*1: Evidence from the going-public process," Journal of Financial Economics, Elsevier, vol. 27(2), pages 447-471, October.
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    11. Alexander Groh & Heinrich Von Liechtenstein & Karsten Lieser, 2010. "The European Venture Capital and Private Equity country attractiveness indices," Post-Print hal-02312815, HAL.
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    13. Da Rin, Marco & Nicodano, Giovanna & Sembenelli, Alessandro, 2006. "Public policy and the creation of active venture capital markets," Journal of Public Economics, Elsevier, vol. 90(8-9), pages 1699-1723, September.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Venture capital; Europe; Venture capital determinants; IPO; Trade sale; Write-off; Unemployment rate.;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • M13 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - New Firms; Startups

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