Comparative Venture Capital Governance. Private versus Labour Sponsored Venture Capital Funds

Douglas Cumming and Jeffrey G. MacIntosh

No 853, CESifo Working Paper Series from CESifo

Abstract: Private independent limited partnership venture capital funds receive capital from institutional investors, without tax incentives. Limited partnership investment activities are governed by restrictive covenants that are determined by negotiated contract between the fund managers (general partners) and the institutional investors (limited partners). By contrast, Canadian Labour Sponsored Venture Capital Corporations (LSVCCs) receive capital only from individual investors who receive tax breaks on capital contributions of up to CAN$5,000. LSVCC investment activities are governed by statutory restrictions. This chapter contrasts the governance of LSVCCs to limited partnerships. We also summarize Canadian evidence on the impact of LSVCC governance and tax incentives: (1) on the distribution of venture capital funding between private and LSVCC funds; (2) on the unusually large overhang of uninvested capital in the Canadian venture capital industry; (3) the portfolio size (i.e. number of investee firms per fund) of private funds versus LSVCCs; and (4) the performance of LSVCCs relative to other types of venture capital organiziations and other comparable investments for individual investors.

Keywords: venture capital; Canada; tax; government; crowding out; portfolio size; governance (search for similar items in EconPapers)
Date: 2003
New Economics Papers: this item is included in nep-law
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Citations: View citations in EconPapers (5)

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