Private equity and venture capital financing in the Czech Republic and other european countries - development, opportunities and limitations

Jaroslava Rajchlová, Zdeněk Brož, Michaela Baranyková and Michal Polák
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Jaroslava Rajchlová: Ústav financí, Fakulta podnikatelská, Vysoké učení technické v Brně, Kolejní 2906/4, 612 00 Brno, Česká republika
Zdeněk Brož: Ústav informatiky, Fakulta podnikatelská, Vysoké učení technické v Brně, Kolejní 2906/4, 612 00 Brno, Česká republika
Michaela Baranyková: Ústav financí, Fakulta podnikatelská, Vysoké učení technické v Brně, Kolejní 2906/4, 612 00 Brno, Česká republika
Michal Polák: Ústav financí, Fakulta podnikatelská, Vysoké učení technické v Brně, Kolejní 2906/4, 612 00 Brno, Česká republika

Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis, 2011, vol. 59, issue 7, 307-316

Abstract: Financing by means of private equity and venture capital (PE/VC) offers businesses the resources required to finance their future growth and bring prospective business plans and innovative ideas to reality. This form of financing is relatively new and even though it offers clear advantages it is not frequently used in the Czech Republic and other European countries in the CEE region. This paper addresses current and very relevant issues related to this form of financing. The purpose of this research is to identify opportunities and limitations for this type of financing based on benchmarking analysis. This analysis observes the development of PE/VC financing in the Czech Republic and compares it with several other countries in the CEE region. This paper discusses several factors that influence the development of PE/VC financing. Several conclusions can be drawn from this research. The Czech Republic is in 10th place in the utilization of venture capital from the selected 22 countries covered in this research. The time frame for this research is between 2004 and 2010. After thorough analysis of development and conditions in other countries a list of recommended changes that have proven positive impact on the whole economy is formulated. The relatively low level of utilization of the venture capital in the Czech Republic may be due to several things for example by a lack of knowledge of this form of financing and the inability of the management to formulate a business plan that is interesting for the PE/VC investor. The managers are often afraid of the administrative complexity and also the investor expects relatively high profitability of the investment. Another possible limitation is that the public issuing of stocks is used rarely in the Czech Republic. Another cause for the low level of utilization is the absence of public and institutional support for this form of financing. Venture capital has clear and measurable positive impacts on the whole economy and it is therefore important to support and research the use of this method of financing.

Keywords: venture capital; private equity; financing; firm; GDP; benchmarking (search for similar items in EconPapers)
Date: 2011
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Persistent link: https://EconPapers.repec.org/RePEc:mup:actaun:actaun_2011059070307

DOI: 10.11118/actaun201159070307

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