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Venture Capital and Corporate Governance

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  • Franklin Allen
  • Wei-ling Song

Abstract

We consider data from 16 Asian countries, 16 European countries and the US to investigate the relationship between venture capital and corporate governance. There are five main findings. First, the variable measuring law and order is negatively related to the importance of venture capital finance. Second, the allocation of investment across different stages and different industries depends more on macroeconomic factors than on corporate governance variables. Third, in Low-GDP countries the allocation of venture capital is greater for low technology industries than for high technology industries. Fourth, venture capital boomed and became significant in many countries during the stock market boom or "bubble" of the late 1990's. Finally, a comparison of Asian and European venture capital shows that in Asia there was more investment in early stage projects while in Europe there was more investment in late stage projects. Also, in Europe there was more investment in medical and biotechnology industries.

Suggested Citation

  • Franklin Allen & Wei-ling Song, 2002. "Venture Capital and Corporate Governance," Center for Financial Institutions Working Papers 03-05, Wharton School Center for Financial Institutions, University of Pennsylvania.
    • Handle: RePEc:wop:pennin:03-05
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    File URL: http://fic.wharton.upenn.edu/fic/papers/03/0305.pdf
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    References listed on IDEAS

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    Cited by:

    1. Fadel Jaoui & Omolola Amoussou & Francis H. Kemeze, 2022. "“Catch me if you can” on drivers of venture capital investment in Africa," African Development Review, African Development Bank, vol. 34(S1), pages 117-140, July.
    2. Fadel Jaoui & Omolola Amoussou & Francis H. Kemeze, 2022. "Working Paper 364 - ‘Catch Me if You Can’ On Drivers of Venture Capital Investment in Africa," Working Paper Series 2490, African Development Bank.
    3. John Armour & Douglas Cumming, 2004. "The Legal Road To Replicating Silicon Valley," Working Papers wp281, Centre for Business Research, University of Cambridge.
    4. Fairchild, Richard, 2011. "An entrepreneur's choice of venture capitalist or angel-financing: A behavioral game-theoretic approach," Journal of Business Venturing, Elsevier, vol. 26(3), pages 359-374, May.

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