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Liquidity, Technological Opportunities, and the Stage Distribution of Venture Capital Investments
Author(s) -
Lahr Henry,
Mina Andrea
Publication year - 2014
Publication title -
financial management
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.647
H-Index - 68
eISSN - 1755-053X
pISSN - 0046-3892
DOI - 10.1111/fima.12048
Subject(s) - venture capital , market liquidity , private equity , business , crash , private equity firm , funding liquidity , equity (law) , financial crisis , finance , distribution (mathematics) , financial system , monetary economics , liquidity crisis , economics , macroeconomics , computer science , political science , law , programming language , mathematical analysis , mathematics
This paper explores the determinants of the stage distribution of European venture capital investments from 1990 to 2011. Consistent with liquidity risk theory, we find that the likelihood of investing in earlier stages increases relative to all private equity investments during liquidity crisis years. While liquidity is the main driver of acquisition investments and, to some extent, of expansion financings, technological opportunities are overall the main driver of early and late stage venture capital investments. In contrast to the dotcom crash, the recent financial crisis negatively affected the relative likelihood of expansion investments, but not of early and late stage investments.