Incremental impact of venture capital financing

Alperovych, Yan; Hübner, Georges

doi:10.1007/s11187-012-9448-6

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Incremental impact of venture capital financing

Alperovych, Yan; Hübner, Georges

2013 • In Small Business Economics, 41, p. 651-666

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https://hdl.handle.net/2268/157198

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10.1007/s11187-012-9448-6

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Keywords :

Venture capital; Performance; Simulation; Value-adding; Selection

Abstract :

[en] This paper investigates the differences in the return generating process of venture capital (VC)-backed firms and their peers that operate without VC financing. Using a unique hand-picked database of 990 VC-backed Belgian firms and a complete population of Belgian small and medium-sized enterprises (SMEs), we focus on the extent to which the presence of a VC investor affects the sensitivity of a firm’s returns to the changes in the capital structure, in the operating cycle, and in the industry dynamics. The differences may stem from the (self-) selection of better companies into VC portfolios, from the venture capitalists’ (VCs) value-adding activities, and/or from both. We examine these factors in the context of a complex simulation procedure which allows separating selection from value-adding when traditional approaches are difficult to implement. Our results indicate that VC-backed firms are able to extract more rent from the changing industry conditions and from the optimizations in their capital structure. The presence of VCs in the firm’s equity seems to have only a marginal effect on the operating cycle efficiency. Overall, the results are suggestive of the value-adding being the main driver of the VC-backed firm’s performance.

Disciplines :

Finance

Author, co-author :

Alperovych, Yan; EMLyon Business School

Hübner, Georges ; Université de Liège - ULiège > HEC-Ecole de gestion : UER > Gestion financière

Language :

English

Title :

Incremental impact of venture capital financing

Publication date :

2013

Journal title :

Small Business Economics

ISSN :

0921-898X

eISSN :

1573-0913

Publisher :

Springer Science & Business Media B.V., Dordrecht, Netherlands

Volume :

Pages :

651-666

Peer reviewed :

Peer Reviewed verified by ORBi

Available on ORBi :

since 16 October 2013

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