The different roles played by venture capital and private equity investors on the investment activity of their portfolio firms

Fabio Bertoni, Maria Alejandra Ferrer and Pellon José Marti
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Maria Alejandra Ferrer: LUZ - Universidad del Zulia
Pellon José Marti: UCM - Universidad Complutense de Madrid = Complutense University of Madrid [Madrid]

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Abstract: Venture capital (VC) and private equity (PE) investors play different roles in their portfolio companies. We argue that this will translate in a recognizable difference in the investment sensitivity to cash flows of portfolio companies and its evolution after the first investment round. We hypothesise that VC, thanks to its ability in overcoming asymmetries in information, will entail a reduction in the financial constraints which hampered the growth of investee firms. We predict, instead, a greater dependency of investments to cash flow for PE-backed companies, driven by the renewed interest for growth of their management combined with higher leverage. We find evidence confirming our hypotheses on a large panel of Spanish unlisted firms in low and medium technology sectors, where both VC and PE firms are active.

Date: 2013-04-01
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Published in Small Business Economics, 2013, 40 (3), 607-633 p. ⟨10.1007/s11187-011-9384-x⟩

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Journal Article: The different roles played by venture capital and private equity investors on the investment activity of their portfolio firms (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-02312955

DOI: 10.1007/s11187-011-9384-x

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