Fabio Bertoni

Board Independence, Ownership Structure and the Valuation of IPOs in Continental Europe

Manuscript Type. Empirical. Research Question/Issue. We combine the value‐creation and value‐protection views of the board of directors to study the impact of board independence (BI) on the value of the firm at the time of its initial public offering (IPO). Research Findings/Insights. We conduct our analysis on a sample of 969 firms that went public in France, Germany, and Italy between 1995 and 2011. We show that BI is a critical factor in the valuation of IPO firms. Our results support both the value‐creation and value‐protection roles of the board of directors. The relative importance of the two roles of the board varies over time, with value‐creation (value‐protection) dominating in IPOs of young (mature) companies. Theoretical/Academic Implications. Our theoretical framework combines the agency and resource‐dependence theories. The impact of BI on IPO valuation depends on the importance of the value‐creation and value‐protection roles played by the board. The change in the relative importance of the two roles determines a U‐shaped relationship between BI and firm age. Corporate governance is particularly important for young and innovative firms (where the resource‐dependence theory applies, and governance acts as a value‐creation device), as well as for mature firms and for companies where ownership and control are separated (where the agency theory applies, and governance serves as a value‐protection mechanism for minority shareholders). Practitioner/Policy Implications. We show that corporate governance is a significant factor affecting the valuation of an IPO company. The importance of BI varies substantially with the knowledge intensity of the industry, the separation between ownership and control, and the age of the listing company.

Cross-Border Investments and Venture Capital Exits in Europe: Mode of Exit and Cross-Border VC Investments

Manuscript Type. Empirical. Research Question/Issue. We examine the way in which the exit mode (i.e., initial public offering – IPO, trade sale, or write�?off) of venture capital (VC) investments is influenced by the additional exit opportunities brought by cross�?border VC investors. Research Findings/Insights. We perform our analysis on a sample of 1,062 VC investments in 462 young high�?tech companies in seven European countries. Our findings indicate that, controlling for firm performance, investor characteristics, and local exit conditions, the probability of exiting via trade sale is positively correlated to the additional set of mergers and acquisitions (M&A) opportunities brought by cross�?border investors. A similar effect, but with weaker statistical significance, is also identified for exits by IPO, which are positively affected by IPO volumes in the countries of cross�?border investors. Theoretical/Academic Implications. Cross�?border VC investment may, at least partially, compensate for inadequate local exit conditions. Cross�?border investors can spillover the capital market activity of their home country and enhance exit options for young ventures. International syndicates are also quicker to write off their non�?performing investments. Practitioner/Policy Implications. Not all exit modes are equally affected by international syndication. The impact of cross�?border investors on the exit mode also depends on their country of origin and, more specifically, on the exit opportunities available there. The mechanism is stronger for trade sales than for IPOs.

Financing Entrepreneurial Ventures in Europe: The Vico Dataset

The VICO project collected a database on young high-tech entrepreneurial companies operating in seven European countries (Belgium, Finland, France, Germany, Italy, Spain, and the United Kingdom). The objective of the data collection process was to build a data infrastructure to conduct an extensive study about the venture capital (VC) activity in high-tech sectors in Europe. The dataset includes two strata of companies: the first is a sample of VC-backed companies and the second a control group of non-VC backed (but potentially investable) companies. Data were collected by local teams from each country (using a variety of commercial and proprietary sources) and checked for reliability and consistency by a centralized data collection unit. The dataset consists of 8,370 companies, 759 of which VC-backed, and 1,125 VC investors. Detailed information was collected for each firm, investor, and investment, including accounting data, patenting data, and investor type and experience.

Policy Reforms for Venture Capital in Europe

This timely book brings together cutting-edge research on the important subject of science and innovation policies. The contributors – distinguished social science scholars – tackle the key challenges of designing and implementing public policies in the context of the new knowledge economy.

Testing the Strategic Asset Allocation of Stabilization Sovereign Wealth Funds

None of the models that have been developed to determine the optimal strategic asset allocation (SAA) of stabilization sovereign wealth funds (SWFs) has received direct empirical validation, primarily because there is a lack of transparency regarding some of the key parameters that characterize the problem. In this paper, building on a mean-variance framework, we derive three sets of parsimonious statistical tests to compare the actual SAA of SWFs to a theoretical optimum. We apply these tests to the portfolio of the worlds largest stabilization SWF (the Norwegian Government Pension Fund - Global or GPF) for the period between 2002 and 2005. The empirical analysis confirms that the static and dynamic deviations of the GPFs SAA from the market equity portfolio are consistent with the theoretical predictions.

CLUSTERING FINANCIAL TIME SERIES BY NETWORK COMMUNITY ANALYSIS

In this paper, we describe a method for clustering financial time series which is based on community analysis, a recently developed approach for partitioning the nodes of a network (graph). A network with N nodes is associated to the set of N time series. The weight of the link (i, j), which quantifies the similarity between the two corresponding time series, is defined according to a metric based on symbolic time series analysis, which has recently proved effective in the context of financial time series. Then, searching for network communities allows one to identify groups of nodes (and then time series) with strong similarity. A quantitative assessment of the significance of the obtained partition is also provided. The method is applied to two distinct case-studies concerning the US and Italy Stock Exchange, respectively. In the US case, the stability of the partitions over time is also thoroughly investigated. The results favorably compare with those obtained with the standard tools typically used for clustering financial time series, such as the minimal spanning tree and the hierarchical tree.

Outward FDI from the BRICs: Trends and Patterns of Acquisitions in Advanced Countries

In the last few decades, emerging markets have been characterized by liberalization of foreign direct investment (FDI) regimes, governance reforms, deregulation, and the general adoption of market-oriented policies. This major process has posed a number of challenges for emerging firms, which have been increasingly exposed to competition from foreign firms and to the pressure of global economic integration. In this scenario, outward foreign direct investments (OFDIs) from emerging countries grew rapidly and assumed a strategic role, representing 16 per cent of global OFDI flows in 2008 and 28 per cent in 2010 (UNCTAD, 2011). OFDIs are also earning increasing attention in the International Business (IB) literature (Luo and Tung, 2007; Sauvant, 2008; Athreye and Kapur, 2009) for three reasons. Firstly, they are a recent and growing phenomenon that still has to be fully described and understood (Hoskisson et ah, 2000; Sauvant, 2005). Secondly, they originate from countries and firms that do not easily fit into the traditional theoretical frameworks adopted to explain OFDIs from advanced countries (Mathews, 2006; Li, 2007; Rugman, 2007; Kalotay, 2008). Thirdly, their impact on the host and home countries still needs to be fully investigated (UNCTAD, 2005b; Goldstein, 2007).

The Role of Governmental Venture Capital in the Venture Capital Ecosystem: An Organizational Ecology Perspective:

We use the theory of organizational ecology to study how governmental venture capital (GVC) affects the investment behavior of private venture capital (PVC). Because of its objectives and dominant competencies, GVC is a unique organizational species that occupies a different niche than PVC. GVC is conceived to establish mutualistic relations with PVC. Accordingly, the greater the presence of GVC in a venture capital (VC) ecosystem, the more PVC investors should be attracted toward GVC’s niche. We consider several relevant niche dimensions at the company (age and size), industry (biotechnology), and regional (competitiveness) levels. Our analysis of 1,239 PVC investments in Europe confirms most of our predictions.

How and When Venture Capital Affects the Investment of Portfolio Firms

This work studies how and when venture capital (VC) affects the investment of its portfolio firms. We estimate an Error Correction Model that takes into account the non-linearity of the investment curve on a sample of 361 young high-tech firms in 6 European countries. The direct effect of VC on firms investment is positive and significant only when internal financial constrains are limited. The indirect effect of VC determines a structural change in the investment curve through the reduction of external financial constraints. This effect is particularly significant when firms receive follow-on rounds.

FINANCING GROWTH AND INNOVATION THROUGH NEW STOCK MARKETS: THE CASE OF EUROPEAN BIOTECHNOLOGY FIRMS

This chapter analyses how capital is raised and employed by a sample of 28 European biotechnology companies listed on Europe’s new stock markets from 1996 to 2000. We find that biotechnology companies rely heavily on IPO proceeds in order to finance their growth. We compare the behaviour of European firms to a sample of comparable U.S. firms. The analysis reveals that European companies tend to raise more capital at the IPO and to invest more aggressively in the short-run, whereas U.S. biotech firms tend to have more cash available before the IPO and invest more conservatively in the short-run.