Faculty of Economics and Business Administration Publications Database

Legality and Venture Governance around the World

Cumming, Douglas
Schmidt, Daniel
Volume: 25
Number: 1
Pages: 54 - 72
Month: January
ISSN-Print: 0883-9026
Link External Source: Online Version
Year: 2010
Keywords: Venture capital; Corporate governance; Syndication; Entrepreneurial finance
Abstract: 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. We also show that country-specific differences exist apart from legal and economic development.