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Determinants of required return in venture capital investments:A five country study

Philippe Desbrières (), Sophie Manigart, Koen De Waele, Mike Wright, Ken Robbie, Harry Sapienza and Amy Beekman

Working Papers CREGO from Université de Bourgogne - CREGO EA7317 Centre de recherches en gestion des organisations

Abstract: Using two complementary theoretical perspectives, we develop hypotheses regarding the determinants of the return required by venture capitalists and test them on a sample of over 200 venture capital companies (VCCs) located in five countries. Consistent with resource based theory, we find that early stage specialists require a significantly higher return than other VCCs when investing in later stage ventures. Consistent with financial theory, we find that acquisition /buyout specialists require a significantly lower return than other VCCs when investing in expansion companies. Furthermore, in comparison to specialists, highly stage-diversified VCCs require a significantly higher return for early stage investments. Independent VCCs require a higher rate of return than captive or public VCCs. In general, higher required returns are associated with VCCs providing more intensity of involvement, having shorter expected hold-ing period of the investment, and being located in the US or UK (in comparison to those in France, Belgium, and the Netherlands).

Keywords: required return; venture capital; investments (search for similar items in EconPapers)
JEL-codes: G24 G34 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cfn, nep-ent and nep-mfd
Date: 2002-07
Note: article publié dans Journal of Business Venturing, vol.17, n°4, juillet 2002, p.291-312
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Published in Journal of Business Venturing, vol.17, n°4, juillet 2002, p.291-312

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