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

  1. Ferrer, María Alejandra
  2. Bertoni, Fabio
  3. Martí, José
Revista:
Small Business Economics

ISSN: 0921-898X 1573-0913

Año de publicación: 2011

Volumen: 40

Número: 3

Páginas: 607-633

Tipo: Artículo

DOI: 10.1007/S11187-011-9384-X GOOGLE SCHOLAR lock_openAcceso abierto editor

Otras publicaciones en: Small Business Economics

Resumen

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.

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