Venture capital financing and the financial distress risk of portfolio firms: How independent and bank-affiliated investors differ

Annalisa Croce (), Diego D’Adda and Elisa Ughetto

Small Business Economics, 2015, vol. 44, issue 1, 189-206

Abstract: We analyze a sample of European high-tech entrepreneurial firms that received bank venture capital (BVC) financing between 1994 and 2004. We employ a “two-step” matching procedure in order to build a control group composed of (1) comparable firms that received venture capital financing from independent investors (IVCs) and (2) comparable non-invested firms. The econometric analyses suggest that BVC investors are interested in the financial risk profile of the firms they invest in. In fact, before the first round of financing, BVC-backed firms show a lower risk of financial distress than both IVC-backed firms and non-invested firms. However, after the investment, BVC-backed firms exhibit a significant increase in debt exposure, compared to non-invested firms. Copyright Springer Science+Business Media New York 2015

Keywords: Bank-affiliated venture capital; Independent venture capital; Financial distress risk; Debt exposure; High-tech entrepreneurial firms; G24; G21; L26 (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (13)

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Persistent link: https://EconPapers.repec.org/RePEc:kap:sbusec:v:44:y:2015:i:1:p:189-206

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DOI: 10.1007/s11187-014-9582-4

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