Contracting, monitoring, and exiting venture investments in transitioning economies: A comparative analysis of Eastern European and German markets

Farag, Hisham; Hommel, Ulrich; Witt, Peter; Wright, Mike

doi:10.1080/1369106042000258490

Cited by 54 publications

(47 citation statements)

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“…So far the literature analysing the determinants of PE activity in the CEE region in the attempt to explain the region's major obstacles to catching up with the developed markets is scarce. Farag et al (2004) focus on the VC and PE markets in Hungary, the Czech Republic and Poland, and compare them with the German market. Using the results of a survey conducted among 68 General Partners (GPs) in diverse transition countries, they identify several factors that inhibit emerging markets' catching up.…”

Section: Schertler (2003) Uses Dynamic Panel Estimations To Identify mentioning

confidence: 99%

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Drivers of Private Equity Investment in CEE and Western European Countries

2010

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Abstract A strong private equity market is a cornerstone for commercialization and innovation in modern economies. However, substantial differences exist in the relative amounts raised and invested in private equity across European countries. We investigate the macro-determinants of private equity investment in Europe, focusing on the comparison between CEE and Western European countries. Our estimations are based on a data set running from 2001 to 2008 and covers 14 Western European and three CEE countries. Applying robust estimation techniques we identify a 'robust' set of determinants of private equity activity in both regions. We find similarities as well as differences in the driving forces of private equity investments in Western European and CEE countries. Our results suggest that commercial bank lending, equity market capitalization, unit labour costs and corporate tax rates are significant determinants of private equity activity. Terms of use: Documents in

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Section: Schertler (2003) Uses Dynamic Panel Estimations To Identify mentioning

confidence: 99%

“…Nonetheless, there is still no broad consensus on the macro-determinants of PE investments and the literature focussing on the CEE countries in the attempt to explain the region's major obstacles to catching up with the developed markets is relatively scarce (compare e.g. Farag et al (2004) and Groh and von Liechtenstein (2009)). …”

Section: Introductionmentioning

confidence: 99%

Drivers of Private Equity Investment in CEE and Western European Countries

2010

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“…In many markets, available exit routes are limited to trade sales, and this is sub-optimal to the development of the VC market. Farag et al (2004) found that the lack of viable exit routes, other than trade sales, had a negative effect on the development of the VC sector in Central and Eastern Europe. Similar results were found by Da Rin, Nicodana and Sembenelli (2006) in a study of 14 European countries and by Banerjee (2008) in the case of India.…”

Section: Viable Exit Mechanismsmentioning

confidence: 99%

“…This has been the finding by Becker & Hellman (2003) in the case of Germany. In addition, the lack of entrepreneurial skills was found to be the stumbling block to the emergence of entrepreneurial opportunities in the post-planned economies of Central and Eastern Europe (Karsai, Wright & Filatotchev, 1997;Farag, Hommel, Witt & Wright, 2004). The simple lack of quality ideas being presented to VCs contributes to the lack of development of the industry.…”

Section: Entrepreneurs and Skill Setsmentioning

confidence: 99%

“…Exits might involve, at a bare minimum, the potential for appropriate bankruptcy proceedings particularly for earlystage investors (Farag et al, 2004). Other exit mechanisms potentially suitable for VC investments include buy-backs by management, trade sales, initial public offerings (IPOs) and sell-on to other VC/PE investors (Cumming et al, 2002).…”

Section: Viable Exit Mechanismsmentioning

confidence: 99%

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Early-stage venture capital in South Africa: Challenges and prospects

Jones¹,

Mlambo

2013

SAJBM

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The aim of this paper is to assess which factors impact the development of early-stage venture capital in South Africa. Factors identified for other markets and countries are explored and their relative importance in South Africa determined from the perspective of market participants. These include venture capital and private equity fund managers, government institutions, intermediaries and university research coordinators. The study used both an online survey, to capture a broad representation of opinion, and interviews, for in-depth responses. There was broad consensus among respondents with regards to the key factors requiring attention, which include the lack of funds targeted at early-stage investments, the lack of specialised fund managers, and the low entrepreneurial skillsets in the country. Through a detailed analysis of the responses, certain measures are proposed that can enhance the development of early-stage venture capital in South Africa such as engaging more with angel investors and improving the cooperation between the different market players in the sector.

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