Contracts and Exits in Venture Capital Finance

By Douglas J. Cumming. 2008

516 citations recorded by the source corpus.

Using a sample of European venture capital (VC) investments, I study the relation between VC contracts and exits. The data indicate that ex ante, stronger VC control rights increase the likelihood that an entrepreneurial firm will exit by an acquisition, rather than through a write-off or an IPO. My findings are robust to controls for a variety of factors, including endogeneity and cases in which the VC preplans the exit at the time of contract choice. My findings are consistent with control-based theories of financial contracting, such as Aghion and Bolton (1992). The Author 2008. Published by Oxford University Press on behalf of The Society for Financial Studies. All rights reserved. For Permissions, please email: journals.permissions@oxfordjournals.org, Oxford University Press.

Subfields: Accounting, Economics and Econometrics

View Paper: https://www.semanticscholar.org/paper/75bb0a85d1476fa8f5085cc08f3c8682790787d4

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Citations in the corpus

Venture Capitalists, Business Angels, and Performance of Entrepreneurial IPOs in the UK and France (2007, unknown): “Moreover, in line with prior governance research by La Porta et al. (1997) and venture capital research by Cumming (2003) and Cumming et al. (2004; 2005), the paper argues that the behaviour of investors and risk financiers may be influenced by institutional and legal differences.”
Determinants of Venture Capital Performance: Europe and the United States (2006, background): “Cumming (2002b) and Schwienbacher (2002a) use questionnaires to evaluate exit decisions, in the case of Schwienbacher in a comparison of US and European venture capital firms.”
What do we really mean when we talk about ‘exit’? A critical review of research on entrepreneurial exit (2014, background): “…1992), firm level determinants of exit (e.g. Balcaen et al., 2012; Ghemawat and Nalebuff, 1985), the relationship between funding and exit (e.g. Cumming, 2008), the relationship between innovation and exit (e.g. Cefis and Marsili, 2006) and the human capital factors leading to exit (e.g. Van…”
IPOs, trade sales and liquidations: Modelling venture capital exits using survival analysis (2007, unknown): “Cumming and MacIntosh (2001) find that exits occurred more quickly for early stages of development, which they interpret as the result of a selection process to sort out the bad from the good projects. Our study provides a somewhat different picture. While exits from later-stage investment are quick”
Capital Structure in Venture Finance (2005, unknown): “It is noteworthy that VCs in Europe also use debt-like securities (Cumming, 2002), as do VCs in developing countries (Lerner and Schoar, 2003).”
Show Me the Right Stuff: Signals for High Tech Startups (2013, unknown): “…finance (see, for instance, Leland and Pyle, 1976; Grinblatt and Hwang, 1989; Denis, 2004; Shane and Stuart, 2002; Kaplan and Per Strömberg, 2004; Cumming, 2008; and Cumming and Johan, 2008), which with the exception of seminal work by Leland and Pyle (1976) and later that of Grinblatt and…”
Board Independence, Ownership Structure and the Valuation of IPOs in Continental Europe (2014, unknown): “, 2010) and different control rights (Cumming, 2008).”
Venture Capital and Other Private Equity: A Survey (2011, unknown): “(Cumming 2008) also shows that stronger VC control rights are more likely to lead to exits by acquisitions rather than by write-offs or IPOs.”
How do venture capitalists make decisions? (2020, unknown): “Cumming (2008) and Cumming and MacIntosh (2003) look at broad patterns in VC exits.”
Squaring venture capital valuations with reality (2020, unknown): “Cumming (2008), Hsu (2004), and Kaplan and Strömberg (2003, 2004) explore VC contracting and the economics behind contractual terms.”
Assessing the impact of public venture capital programmes in the United Kingdom: : Do regional characteristics matter? (2015, unknown): “Following the approach of Cumming (2008), we investigate the performance of hybrid VC funds (i.e. funds backed by both private and public sector funding) as opposed to private VC funds in the different regions of the United Kingdom along three interrelated dimensions: 1) the propensity of hybrid VC…”
IPOs versus Acquisitions and the Valuation Premium Puzzle: A Theory of Exit Choice by Entrepreneurs and Venture Capitalists (2011, unknown): “Cumming (2008) provides evidence consistent with this prediction based on the exit decisions of firms in a number of European countries.”
Government, Venture Capital and the Growth of European High-Tech Entrepreneurial Firms (2014, background): “…found significant variations in terms of the reputation capital (Lerner, 1994a; Gompers, 1996; Hsu, 2004; Hochberg et al., 2007; Sorensen, 2007; Nahata, 2008), fund size (Kaplan and Schoar, 2005; Cumming, 2008; Cumming and Dai, 2011) and limited attention of the investors (Cumming and Dai, 2011).”
A Review and Road Map of Entrepreneurial Equity Financing Research: Venture Capital, Corporate Venture Capital, Angel Investment, Crowdfunding, and Accelerators (2017, background): “For example, Cumming and MacIntosh (2006) find evidence that a Canadian government venture vehicle crowds out private venture money.”
The Relationship between Slack Resources and the Performance of Entrepreneurial Firms: The Role of Venture Capital and Angel Investors (2013, unknown): “Second, VC investors tend to write extensive contracts by putting together specific shareholder agreements and stipulating differentiated shareholder rights (Cumming, 2008).”