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Venture Capital Performance: The Disparity Between Europe and the United States / Performances du capital risque: Les disparités entre l'Europe et les États-Unis

Ulrich Hege (), Frédéric Palomino and Armin Schwienbacher
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Frédéric Palomino: Edhec Business School - Edhec Business School
Armin Schwienbacher: UCL - Université Catholique de Louvain

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Abstract: This paper compares the success of venture capital investments in the United States and in Europe by analyzing individual venture-backed companies and the value generated within the stage financing process. We document that US venture capitalists generate significantly more value with their investments than their European counterparts. We find differences in contracting behavior, such as staging frequency and syndication, and evidence that they help to explain the observed performance gap and we report a substantial unexplained residual. We find that US venture funds investing in Europe do not perform better their European peers. European Common Law and Civil Law countries exhibit comparable levels of venture performance, and differences in stock market development or tax subsidies in favor of venture investments are unrelated to performance differences. European IPO exits from venture investments yield returns similar to the US, while trade sale exits weakly underperform. We attribute the overall performance gap essentially to the segment of poorly performing companies.

Keywords: venture capital performance; financial development; stage financing; exit; monitoring (search for similar items in EconPapers)
Date: 2009
Note: View the original document on HAL open archive server: https://hal-hec.archives-ouvertes.fr/hal-00493173
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Published in Finance, 2009, Vol.30,nº1, pp.7-50

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