DETERMINANTS OF PRIVATE EQUITY FUNDRAISING IN WESTERN EUROPE

The aim of this paper is to identify the key factors that lie behind venture capital/private equity fundraising in countries where there is scarce and asymmetric information about final returns. The main contribution of this paper is to explain fundraising by means of variables directly related to the venture capital process rather than by macroeconomic ones. We use panel data techniques on data from 16 European countries during the nineties. In the light of the long period required for investing committed capital and the illiquid nature of investments until the fund is divested, the focus is placed on the investing capabilities of fund managers. We find that the amounts invested in the previous year have a positive and significant impact on fundraising. In this sense, the market would be regarding the ability of fund managers to invest the total amounts investors have previously committed.Disbursements; Fundraising; Private Equity; Venture Capital.

CHARACTERISATION OF THE REPUTATION OF PRIVATE EQUITY MANAGERS: EVIDENCE IN SPAIN

In the light of the Agency and Signalling Theories, the aim of this paper is to analyse the relationship between investors and private equity managers in order to identify the factors that affect the latter's reputation. Since there are no individual references about their past returns, the reputation of such players is thought to be linked to their capacity for obtaining new funds in countries such as Spain. Two groups of variables that might affect reputation are identified: variables in the first group are linked to the private equity cycle, and those in the second are related to the external image of the operator. The analysis focuses on the activity of almost all private equity investors operating in Spain during 1991-2001. The results show that the lagged volume of investments acts as an indicator of the ability to manage larger amounts of capital. The exogenous characteristics of highest importance are the size of the funds under management and the belonging to the National Private Equity Association. Because of the wide variety of private equity firms, the analysis is completed for diverse groups, which may behave in a different manner. En este artículo se analiza la relación que se origina entre inversores y operadores decapital riesgo dentro del marco de las Teorías de Agencia y de Señales. La finalidad esidentificar los factores que determinan la reputación de estos operadores. Ante la ausenciade referencias individuales de rentabilidad, la reputación puede representar un elementobásico para señalar la capacidad para captar nuevos fondos en países en los que el mercadode capital riesgo está en proceso de maduración. Dos grupos de variables que puedenafectar a la reputación son identificados: uno relacionado con la actividad desarrolladay otro vinculado a aspectos externos. El análisis se centra en la actividad de la prácticatotalidad de operadores de capital riesgo activos en España durante el periodo 1991-2001.Los resultados muestran que el volumen de inversiones registrado en el pasado indica unacapacidad para gestionar una cifra superior de capitales. Las características exógenasde mayor importancia son el tamaño del operador y la pertenencia a la AsociaciónNacional de Capital Riesgo. Dada la gran variedad de operadores existentes en España,el análisis se completa para diferentes subgrupos que podrían comportarse de distintamanera, encontrándose evidencia en este sentido.Captación de fondos, capital riesgo, reputación; Teoría de Agencia y de Señales. Fundraising, private equity, reputation; agency, signalling theory.

The impact of government-supported participative loans on the growth of entrepreneurial ventures

We study the employment and sales growth of entrepreneurial ventures that have received a governmentsponsored participative loan (PL), a hybrid form of financing between debt and equity. We use propensity-score matching (PSM) and instrumental variable analysis (2SLS) to study a sample of 512 entrepreneurial Ventures that received a PL from a Spanish government agency between 2005 and 2011. We find evidence that PLs significantly boosted their beneficiaries’ employment and sales. In the two years following loan issuance, a 1-million-Euro PL generated an increase in average employment of between 12.1 (PSM) and 14.7 (2SLS) units and an increase in sales of between 1.09 and 1.97 million Euro relative to the average for the two years prior to loan issuance. The effect is larger for high-tech, young and small entrepreneurial ventures and for those that received a PL during the global financial crisis. The effect on growth is significant and stable, and PLs increase their beneficiaries’ annual growth by 10.6% for employment and by 18.0% for sales. We do not find evidence of industry or regional spillovers, nor do we find differences in the probability of survival of PL beneficiaries after we control for their characteristics.We are grateful to two anonymous referees and to the associate editor Maria Savona for the constructive comments. We acknowledge financial assistance from the Spanish Ministry of Economics and Competitiveness (ECO2014-55674-R)

Sensibilidad de la oferta de capital riesgo a cambios en el marco regulatorio

Este trabajo analiza la eficacia de dos cambios regulatorios sobre la captación de fondos de capital riesgo. En particular, se estudia el efecto de cambios en la tasa impositiva sobre las ganancias de capital y la introducción de una legislación específica que regula la actividad de capital riesgo. Considerando la población de entidades de capital riesgo en España en el periodo 1991-2007, los resultados muestran la eficacia de la introducción de una regulación específica que pretende limitar la doble tributación y aportar seguridad jurídica a los inversores. Por el contrario, no se encuentra suficiente evidencia del efecto de una reducción impositiva en las ganancias de capital en la tributación de las personas físicas, quizá por el efecto indirecto que tiene a través de la demanda de capital riesgo. Estos resultados son importantes para el regulador pues señalan la efectividad de determinadas normas encaminadas al desarrollo de los mercados de capital riesgo.This work analyses the efficacy of two regulatory changes on private equity fundraising. In particular, the efficacy of changes in the capital gains tax and the introduction of a new legislation regulating private equity activity are analysed. Considering the population of private equity institutions in Spain during the period 1991-2007, the results show the effectiveness of the introduction of specific regulation intended to limit double taxation and provide confidence to investors. On the contrary, no firm evidence is found about the effect of a reduction of the tax in capital gains at the personal income tax, maybe due to the indirect relationship with the demand for private equity. These results are important to the regulator since they show the effectiveness of several measures aimed at contributing to the development of private equity markets.Los autores agradecen el apoyo financiero del Ministerio de Educación y Ciencia de España, dentro del proyecto ECO2008-02599/ECON, y de la Generalitat Valenciana, como parte del proyecto GVPRE/2008/316

A beacon in the night: Government certification of SMEs towards banks

Policymakers around the world have created several schemes to support financially-constrained SMEs. However, whether these mechanisms improve the access to external sources of finance or on the contrary crowd out private players remains a relevant question. In this paper we study the effectiveness of a recent form of government support, called participative loan, in improving recipient SMEs’ access to external financial debt. Relying on the literature about the certification effect, we develop hypotheses on the conditions under which the improvement is stronger. The empirical analysis is based on a sample of 488 Spanish SMEs that received participative loans from a Spanish government agency and a control group of 719 matched twins. We show that the former register significantly higher external financial debt (+31.5%). The effect is stronger for smaller firms, or for those operating in high-technology sectors, which suffer more acutely from information asymmetries, and negligible for firms that already received support from another government-supported institution. After ruling out alternative explanations, we interpret this result as a positive evidence of government certification of SMEs towards banks.Spanish Ministry of Economics and Competitiveness (ECO2014-55674-R)Depto. de Administración Financiera y ContabilidadFac. de Ciencias Económicas y EmpresarialesTRUEpu

A Framework for selfregulation in venture capital and private equity: Evidence in European Markets

This paper proposes a conceptual framework based on both environmental and industrial factors that could explain, in aggregated terms, capital flows within venture capital and private equity markets. The interaction between supply and demand is directly affected by three conditions: the size of the domestic market, the accessibility of a stock market for growing companies and the entrepreneurial environment. Evidence is found on the significant impact of all three conditions on the aggregated commitments to venture capital and private equity organizations in a panel of sixteen European countries. Prior to its inclusion in our model, we find evidence of the impact that several instruments related to the entrepreneurial environment exert on investments

Determinants of private equity fundraising in western europe

The aim of this paper is to identify the key factors that lie behind venture capital/private equity fundraising in countries where there is scarce and asymmetric information about final returns. The main contribution of this paper is to explain fundraising by means of variables directly related to the venture capital process rather than by macroeconomic ones. We use panel data techniques on data from 16 European countries during the nineties. In the light of the long period required for investing committed capital and the illiquid nature of investments until the fund is divested, the focus is placed on the investing capabilities of fund managers. We find that the amounts invested in the previous year have a positive and significant impact on fundraising. In this sense, the market would be regarding the ability of fund managers to invest the total amounts investors have previously committed

Characterisation of the reputation of private equity managers: evidence in Spain

In the light of the Agency and Signalling Theories, the aim of this paper is to analyse the relationship between investors and private equity managers in order to identify the factors that affect the latter's reputation. Since there are no individual references about their past returns, the reputation of such players is thought to be linked to their capacity for obtaining new funds in countries such as Spain. Two groups of variables that might affect reputation are identified: variables in the first group are linked to the private equity cycle, and those in the second are related to the external image of the operator. The analysis focuses on the activity of almost all private equity investors operating in Spain during 1991-2001. The results show that the lagged volume of investments acts as an indicator of the ability to manage larger amounts of capital. The exogenous characteristics of highest importance are the size of the funds under management and the belonging to the National Private Equity Association. Because of the wide variety of private equity firms, the analysis is completed for diverse groups, which may behave in a different manner

What money cannot buy: a new approach to measure venture capital ability to add non-financial resources

Grounding our work on the resource-based view of the firm, we study and quantify the impact of non-financial resources added by venture capital (VC) on the growth performance of investee companies. While most of the literature compares VC-backed companies with similar companies that did not receive external financing, our originality stems from the use of a counterfactual of companies that received external quasi-equity financing (in the form of participative loans) but not non-financial resources. We use a difference-in-difference (DD) estimator to disentangle the effect of an injection of financial resources (which can be used by companies to acquire non-financial resources) from the contribution of the unique nonfinancial resources brought in by VC (which companies cannot otherwise acquire). Our results are based on a large sample of young Spanish SMEs that received either VC (915) or participative loans (1551) between 2005 and 2013 as first type of financing. We find that the contribution of the non-financial resources leads to yearly increases of 12.86% in employment, 38.13% in total assets, and 54.03% in sales. Furthermore, we find that only the most experienced VC firms contribute with valuable non-financial resources.Spanish Ministry of Economics and Competitiveness (ECO2014-55674-R)Depto. de Administración Financiera y ContabilidadFac. de Ciencias Económicas y EmpresarialesTRUEpu