The law and finance of venture capital financing in Europe: findings from the RICAFE research project

Da Rin, Marco and Hege, Ulrich and Llobet, Gerard and Walz, Uwe (2005): The law and finance of venture capital financing in Europe: findings from the RICAFE research project. Published in: European Business Organization Law Review , Vol. 7, (2006): pp. 525-547.

Abstract

This survey article summarizes the findings of four research projects on the venture capital industry in Europe and the role played by legal institutions and the legal framework. A study on patent litigation insurance argues that insurance can create a level playing field for small innovators, but that compulsory insurance can only be justified as a transitory scheme. The second study argues that intermediaries from countries with a better legal tradition will provide more governance and value added services, even when investing abroad. It also provides supportive empirical evidence based on an extensive questionnaire-study. The third project investigates the relationship between venture investments and a widely used legality index in 39 countries, finding that better laws facilitate faster deal screening and origination, lead to a higher probability of syndication, and also facilitate board representation of the investors. The final study documents a significant performance gap between the European and the US venture capital industry, but argues that the difference can not be attributed to differences in legal origin.

• Item Type: MPRA Paper
• Language: English
• Keywords: venture capital, patent litigation, legal system, corporate governance, legality index, performance
• Subjects: G - Financial Economics > G2 - Financial Institutions and Services > G24 - Investment Banking ; Venture Capital ; Brokerage ; Ratings and Ratings Agencies

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