Distressed Portfolio Company Exit and Cross-border Venture Capital Investors

Devigne, David; Manigart, Sophie; Wright, Mike

doi:10.5465/ambpp.2013.12285abstract

Cited by 2 publications

(4 citation statements)

References 36 publications

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“…This effect is even stronger if the VC investor is an independent fund. That finding matches Devigne et al (), who argue that cross‐border investors suffer less from the escalation of commitment bias in decision making. They might judge the situation more objectively, leading to an earlier exit if the company is underperforming.…”

Section: Resultssupporting

confidence: 90%

“…Fourth, the likelihood of exiting an unsuccessful venture by means of a write‐off or share buy‐back increases, and the time until this event decreases, with the presence of foreign investors. This result, in line with evidence by Devigne, Manigart, and Wright (), supports the idea that international syndication puts more emphasis on professionalism and that unsuccessful transactions are abandoned more quickly. Legal rights in the investee's country are important for winding up start‐ups, and we find that the process is quicker in countries with higher quality legal systems.…”

Section: Introductionsupporting

confidence: 88%

“…This difference is due to a higher incidence of both IPOs (22.1% for cross‐border, 9.4% for local deals) and liquidations (31.6% for cross‐border, 25.9% for local deals). These differences suggest that while, on the one hand, cross‐border investors may on average be involved in more successful companies (Chemmanur et al, ), they are also less prepared to escalate their commitment when firm performance is unsatisfactory, and instead write off their exposure (Devigne et al, ). Exit mode also seems to vary across industries.…”

Section: Methodsmentioning

confidence: 99%

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Cross‐Border Investments and Venture Capital Exits inEurope

Bertoni¹,

Groh²

2014

Corporate Governance

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Manuscript Type Empirical Research Question/Issue We examine the way in which the exit mode (i.e., initial public offering – IPO, trade sale, or write‐off) of venture capital (VC) investments is influenced by the additional exit opportunities brought by cross‐border VC investors. Research Findings/Insights We perform our analysis on a sample of 1,062 VC investments in 462 young high‐tech companies in seven European countries. Our findings indicate that, controlling for firm performance, investor characteristics, and local exit conditions, the probability of exiting via trade sale is positively correlated to the additional set of mergers and acquisitions (M&A) opportunities brought by cross‐border investors. A similar effect, but with weaker statistical significance, is also identified for exits by IPO, which are positively affected by IPO volumes in the countries of cross‐border investors. Theoretical/Academic Implications Cross‐border VC investment may, at least partially, compensate for inadequate local exit conditions. Cross‐border investors can spillover the capital market activity of their home country and enhance exit options for young ventures. International syndicates are also quicker to write off their non‐performing investments. Practitioner/Policy Implications Not all exit modes are equally affected by international syndication. The impact of cross‐border investors on the exit mode also depends on their country of origin and, more specifically, on the exit opportunities available there. The mechanism is stronger for trade sales than for IPOs.

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Section: Resultssupporting

confidence: 90%

Section: Introductionsupporting

confidence: 88%

Section: Methodsmentioning

confidence: 99%

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Cross‐Border Investments and Venture Capital Exits inEurope

Bertoni¹,

Groh²

2014

Corporate Governance

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“…Referring to the classic studies by Bottazzi et al [40,43], this paper takes domestic frms that were invested in the frst round by other domestic VCs in the same month as potential investment targets that domestic VCs could invest in but not invest in as the sample. In addition, this paper selects the industry match between domestic VC and domestic frms as the exclusion constraint variable in the frst stage of regression.…”

Section: Sample Selection Biasmentioning

confidence: 99%

Follow Me Going Out: Cross-Border Investment of Domestic Venture Capital and Overseas Listing of Portfolio Companies

Yu¹,

Wang

Bing

2023

Complexity

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This paper investigates the impact of cross-border investment of domestic venture firms (VCs) on the overseas listings of their domestic portfolio companies. Using a sample of 1,439 domestic VCs’ first-round domestic investment events collected by Crunchbase and PEDATA, we find that the more cross-border investment experience domestic VCs have, the more likely their domestic portfolio companies are to go public outside China. The findings remain robust after using the instrumental variable method to eliminate endogeneity, the Heckman two-stage regression method to eliminate sample selection bias, and the exclusion of a portion of the sample for reregression. In addition, we further find that foreign VCs participating in follow-on financing play a mediating role in the relationship between the cross-border investments of domestic VCs and the overseas listings of their portfolio companies. This paper reveals the critical path for domestic VCs to go out and bring in foreign VCs to promote overseas listings of domestic firms. The findings of this paper are critical to the layout of domestic VCs’ internationalization strategy and the sustainable development of domestic firms.

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Distressed Portfolio Company Exit and Cross-border Venture Capital Investors

Cited by 2 publications

References 36 publications

Cross‐Border Investments and Venture Capital Exits inEurope

Cross‐Border Investments and Venture Capital Exits inEurope

Follow Me Going Out: Cross-Border Investment of Domestic Venture Capital and Overseas Listing of Portfolio Companies

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