Journal Article

The different roles played by venture capital and private equity investors on the investment activity of their portfolio firms

Ferrer, María Alejandra, Bertoni, Fabio, Martí, José

2013

Overview

Venture capital (VC) and private equity (PE) investors play different roles in their portfolio companies. We argue that this will translate in a recognizable difference in the investment sensitivity to cash flows of portfolio companies and its evolution after the first investment round. We hypothesise that VC, thanks to its ability in overcoming asymmetries in information, will entail a reduction in the financial constraints which hampered the growth of investee firms. We predict, instead, a greater dependency of investments to cash flow for PE-backed companies, driven by the renewed interest for growth of their management combined with higher leverage. We find evidence confirming our hypotheses on a large panel of Spanish unlisted firms in low and medium technology sectors, where both VC and PE firms are active.

• Publisher: Springer,Springer US,Springer Nature B.V
• Subject: Business / Business administration / Business and Management / Business structures / Buyouts / Capital / Capital investments / Cash flow / Companies / Dependency / Economics and Finance / Entrepreneurship / Equity / Financial investments / Financial services / Humanities and Social Sciences / Hypotheses / Industrial Organization / Investment / Investment companies / Investments / Investors / Leveraged buyouts / Management / Microeconomics / Portfolio management / Portfolios / Private equity / Reassessing the Relationships between Private Equity Investors and Their Portfolio Companies / Roles / Small & medium sized enterprises-SME / Social entrepreneurship / Spain / Spanish language / Statistical analysis / Venture capital