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Institutional environment and financing costs: Evidence from venture capital backed transactions

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  • Liang, Qing
  • Gan, Christopher
  • Li, Zhaohua

Abstract

This study examines the financing cost enterprises confront when seeking backing from venture capitalists (VC) in different institutional settings related to proxy voting rights. Using a sociological perspective, we have developed new indexes for proxy voting rights from 28 countries. Examining 2598 VC-backed financing deals over the period of 1997 to 2016, we find that proxy voting rights significantly reduce enterprises’ financing costs. Our findings are robust to a number of checks after addressing endogeneity concerns.

Suggested Citation

  • Liang, Qing & Gan, Christopher & Li, Zhaohua, 2019. "Institutional environment and financing costs: Evidence from venture capital backed transactions," Finance Research Letters, Elsevier, vol. 31(C).
    • Handle: RePEc:eee:finlet:v:31:y:2019:i:c:s1544612318307694
    DOI: 10.1016/j.frl.2018.11.018
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    More about this item

    Keywords

    Venture capital; Proxy voting rights; Financing costs;
    All these keywords.

    JEL classification:

    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • K40 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - General

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