Marina Balboa

An Integrative Approach to the Determinants of Private Equity Fundraising

This paper builds on previous papers about private equity fundraising in two ways. Firstly, a micro and macroeconomic theoretical base is developed to support the empirical model proposed. Secondly, new explanatory variables that are related to the private equity process itself are added, thus completing the set of variables, which were basically macroeconomic and environment-related variables, introduced in previous papers. Evidence is found of the positive and significant effect of lagged aggregated investments and divestments on new funds raised, together with gross domestic product growth and the evolution of gross domestic savings.

The Value of Adjusting the Bias in Recommendations: International Evidence

The financial literature has shown that both earnings forecasts and investment recommendations are optimistically biased. However, while the bias in earnings forecasts has decreased over time and even some recent studies show that they are no longer optimistic, in the case of investment recommendations this bias still remains relatively constant over time. Therefore, it seems that recommendations are less credible to investors than earnings forecasts. The vast majority of recommendation studies have been carried out at the country level. In this paper, we use an international context to study whether profitable investment strategies exist when adjusting the recommendation bias of each analysed country. The adjustment we propose to correct this bias takes into account the differences across countries, and also varies in time to correct for the changes in bias over time within countries. Our empirical results show that there are in fact significant differences in the level of bias among countries, with the US and the UK being the countries with the highest bias. Second, the adjusted consensus portfolios are more orthogonal to typical investment styles (size, book-to-market and attention) and we find that investors could implement a higher number of profitable investment strategies using this adjusted measure. In this line, the results show that the countries with the lowest bias obtain the highest risk adjusted abnormal returns. Third, our work entails a practical implication, as it shows the value embedded in a simple necessary adjustment in the global asset management context. This is an important result showing that profitable investment strategies exist when considering a global portfolio based on adjusted recommendations.

Impact of funding and value added on Spanish venture capital-backed firms

This paper contributes to the literature on the effect of venture capital (VC) on the economic development of areas in which those specialized investors are active. The work focuses on the separate consideration of two effects that are supposed to explain the superior performance of a large sample of Spanish VC-backed firms, namely funding and value-added services provided by VC managers to their investee firms. The results show that funding is significant regardless of the stage of development of the investee firm. The value added, however, is only significant for the subsample of firms at the expansion stage.

Is the Spanish public sector effective in backing venture capital

Publisher Summary This chapter analyzes the role of private versus public venture capital (VC). The study is based on a highly representative sample of investments made in Spain, which makes this study interesting as Spain is a country where public sector funding played a principal role in the 1980s, sharing this role with private-sector investors since the early 1990s. The role played by venture capitalists in investment firms is thought to be important, as they are specialized financial intermediaries that provide a number of non-financial inputs along with their financial contribution. Firms backed with public funds are expected to grow at a lower rate since such funds are more oriented to social aims and regional development of depressed areas. Focusing on employment growth and using a sample of venture-backed Spanish firms, results show that only private VC has a significant impact on this variable. This chapter also studies whether this result could be related simply to geographical location, since the bulk of public funds are invested in underdeveloped areas that lack the appropriate networks to foster growth. Results show that while the positive impact of private funds is significant both in developed and underdeveloped areas, this is not the case for public funds. This questions the role played by Spanish public VC and points to the importance of the managerial support that is inherent in private venture capital. The implications of these results for policy makers lead to the adopting of alternative management strategies, such as assigning the allocation of public money to experienced private management teams rather than creating management structures that are neither independent in their activity nor experienced in venture capital investing.

Characterisation Of The Reputation Of Private Equity Managers: Evidence In Spain

In the light of the Agency and Signalling Theories, the aim of this paper is to analyse the relationship between investors and private equity managers in order to identify the factors that affect the latters reputation. Since there are no individual references about their past returns, the reputation of such players is thought to be linked to their capacity for obtaining new funds in countries such as Spain. Two groups of variables that might affect reputation are identified: variables in the first group are linked to the private equity cycle, and those in the second are related to the external image of the operator. The analysis focuses on the activity of almost all private equity investors operating in Spain during 1991-2001. The results show that the lagged volume of investments acts as an indicator of the ability to manage larger amounts of capital. The exogenous characteristics of highest importance are the size of the funds under management and the belonging to the National Private Equity Association. Because of the wide variety of private equity firms, the analysis is completed for diverse groups, which may behave in a different manner. En este articulo se analiza la relacion que se origina entre inversores y operadores decapital riesgo dentro del marco de las Teorias de Agencia y de Senales. La finalidad esidentificar los factores que determinan la reputacion de estos operadores. Ante la ausenciade referencias individuales de rentabilidad, la reputacion puede representar un elementobasico para senalar la capacidad para captar nuevos fondos en paises en los que el mercadode capital riesgo esta en proceso de maduracion. Dos grupos de variables que puedenafectar a la reputacion son identificados: uno relacionado con la actividad desarrolladay otro vinculado a aspectos externos. El analisis se centra en la actividad de la practicatotalidad de operadores de capital riesgo activos en Espana durante el periodo 1991-2001.Los resultados muestran que el volumen de inversiones registrado en el pasado indica unacapacidad para gestionar una cifra superior de capitales. Las caracteristicas exogenasde mayor importancia son el tamano del operador y la pertenencia a la AsociacionNacional de Capital Riesgo. Dada la gran variedad de operadores existentes en Espana,el analisis se completa para diferentes subgrupos que podrian comportarse de distintamanera, encontrandose evidencia en este sentido.

From Venture Capital to Private Equity: The Spanish Experience

This article analyzes the evolution of the Spanish venture capital and private equity markets during the last 16 years, making at the same time a comparison with that experienced by the European markets. The aim of the article is to identify some key ideas that could explain the shift in the investment focus from the original concept of venture capital to the wider approach of private equity. Evidence of a shift towards mature companies is found, the difficulties in the exit processes of early-stage investments being the main constraint on real venture capital activity.

Self-regulation in European venture capital and private equity markets

This paper proposes a conceptual framework based on both environmental and industrial factors that could explain, in aggregated terms, capital flows within venture capital and private equity markets. The interaction between supply and demand is directly affected by three conditions: the size of the domestic market, the accessibility of a stock market for growing companies, and the entrepreneurial environment. Evidence is found for the significant impact of all three conditions on the aggregated commitments to venture capital and private equity organisations in a panel of 16 European countries. Prior to its inclusion in our model, we find evidence of the impact that several instruments related to the entrepreneurial environment exert on investments.

Are Firms Accessing Venture Funding More Financially Constrained? New Evidence from Capital Structure Adjustments

We analyze whether firms that receive venture capital (VC) at a later date face more financial constraints than a one-by-one matched sample of firms that did not receive VC funding (control group). The aim is to check whether their financial flexibility explains why they decide to seek external equity funding. In contrast with other papers, which focus on the sensitivity of investments to cash flow, we study this issue by applying a dynamic model to analyze the speed of adjustment to their target debt levels prior to receiving the first VC investment. We analyze a representative sample of 237 Spanish unlisted firms that received VC between 1995 and 2007 and its corresponding control group. We find that firms that receive VC funding show a significantly lower speed of adjustment than their matched peers before the initial VC round. It seems that the former are more concerned about funding the required investments than about adjusting the firms debt ratio to a target level. Our results confirm the role of VC in filling the equity gap in constrained unlisted firms. From a capital structure perspective, VC may become a tool for these companies to balance their capital structure in a growth process.