Venture Capital Performance: The Disparity Between Europe and the United States

Hege, Ulrich, Palomino, Frederic and Schwienbacher, Armin (2009) Venture Capital Performance: The Disparity Between Europe and the United States. Finance, 30 (1). pp. 7-50.

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Official URL: http://tse-fr.eu/pub/30047

Abstract

This paper compares the success of venture capital investments in the United States and in Europe by analyzing individual venture-backed companies and the value generated within the stage financing process. We document that US venture capitalists generate significantly more value with their investments than their European counterparts. We find differences in contracting behavior, such as staging frequency and syndication, and evidence that they help to explain the observed performance gap and we report a substantial unexplained residual. We find that US venture funds investing in Europe do not perform better their European peers. European Common Law and Civil Law countries exhibit comparable levels of venture performance, and differences in stock market development or tax subsidies in favor of venture investments are unrelated to performance differences. European IPO exits from venture investments yield returns similar to the US, while trade sale exits weakly underperform. We attribute the overall performance gap essentially to the segment of poorly performing companies.

Item Type: Article
Language: English
Date: 2009
Refereed: Yes
Subjects: B- ECONOMIE ET FINANCE
Divisions: TSE-R (Toulouse)
Site: UT1
Date Deposited: 27 Apr 2016 08:40
Last Modified: 07 Mar 2018 13:23
OAI ID: oai:tse-fr.eu:30047
URI: http://publications.ut-capitole.fr/id/eprint/19341

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