Legality and Venture Governance Around the World

38 Pages Posted: 16 Apr 2008 Last revised: 10 Sep 2008

See all articles by Douglas J. Cumming

Douglas J. Cumming

Florida Atlantic University; Birmingham Business School; European Corporate Governance Institute (ECGI)

Daniel Schmidt

University of Frankfurt, CEPRES Center of Private Equity Research

Uwe Walz

Goethe University Frankfurt - Institute of Economics; Leibniz Institute for Financial Research SAFE

Date Written: January 1, 2008

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 and the use of securities that do not require periodic cash flows prior to exit. We also show country-specific differences exist apart from legal and economic development.

Keywords: Venture Capital, Corporate Governance, Syndication, Entrepreneurial Finance

JEL Classification: G24, G31, G32

Suggested Citation

Cumming, Douglas J. and Schmidt, Daniel and Walz, Uwe, Legality and Venture Governance Around the World (January 1, 2008). Journal of Business Venturing, Forthcoming, Available at SSRN: https://ssrn.com/abstract=537243 or http://dx.doi.org/10.2139/ssrn.537243

Douglas J. Cumming (Contact Author)

Florida Atlantic University ( email )

777 Glades Rd
Boca Raton, FL 33431
United States

HOME PAGE: http://sites.google.com/view/douglascumming/bio?authuser=0

Birmingham Business School ( email )

Edgbaston Park Road
Birmingham, B15 2TY
United Kingdom

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
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1000 Brussels
Belgium

HOME PAGE: http://https://ecgi.global/users/douglas-cumming

Daniel Schmidt

University of Frankfurt, CEPRES Center of Private Equity Research ( email )

Grüneburgplatz 1
Frankfurt am Main, 60323
Germany

Uwe Walz

Goethe University Frankfurt - Institute of Economics ( email )

Postfach 81
D-60054 Frankfurt
Germany

Leibniz Institute for Financial Research SAFE ( email )

(http://www.safe-frankfurt.de)
Theodor-W.-Adorno-Platz 3
Frankfurt am Main, 60323
Germany

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