The Determinants of Venture Capital in Europe — Evidence Across Countries
Félix, Elisabete Gomes Santana Pires, Cesaltina Pacheco Gulamhussen, Mohamed Azzim
Félix, Elisabete Gomes Santana
Pires, Cesaltina Pacheco
Gulamhussen, Mohamed Azzim
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Publication Type
Journal article
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Supervisor
Publication Year
2013-12
Journal
Journal of Financial Services Research
Book
Publication Volume
44
Publication Issue
3
Publication Begin page
259
Publication End page
279
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Abstract
This article analyses the determinants of European venture capital activity. The main novelty of our work is in accounting for the idiosyncrasies of the European venture capital market. In particular, we investigate whether the size of the merger and acquisition market (M&A) is important in explaining venture capital. Moreover, our work is the first that analyses the impact of the degree of information asymmetry at the macro level, the direct impact of the level of entrepreneurial activity and the impact of the unemployment rate on venture capital activity. We use aggregate data from 23 European countries for the period 1998–2003 to estimate panel data models with fixed and random effects. Our results reveal that the size of the M&A market and the market-to-book ratio have a positive impact on venture capital activity whereas the unemployment rate influences the venture capital market negatively. These results highlight the importance of the exit environment and of the degree of asymmetric information for the venture capital market.
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Keywords
3502 Banking, Finance and Investment, 35 Commerce, Management, Tourism and Services, 3507 Strategy, Management and Organisational Behaviour