Sonali Hazarika

Success in Global Venture Capital Investing: Do Institutional and Cultural Differences Matter?

We analyze the impact of institutional and cultural differences on success in global venture capital (VC) investing. In both developed and emerging economies, superior legal rights (and enforcement) and better-developed stock markets significantly enhance VC performance. Remarkably, cultural distance between countries of the portfolio company and its lead investor positively affects VC success. Further analysis reveals that cultural differences create incentives for rigorous ex-ante screening, improving VC performance. Finally, local VC participation enhances success and mitigates foreign VCs’ liability of foreignness, albeit only in developed economies. Our findings follow from analyzing VC investments in nearly 10,000 companies across 30 countries.

Equity Market Microstructure: Taking Stock of What We Know

For over three decades, the microstructure literature has grown and trading systems around the world have been reengineered into modern electronic platforms. In this article, the authors consider these developments, concentrating on microstructure issues that are germane to equity market architecture, and focus on the design of one trading facility, Deutsche Börse’s Xetra. Important insights were gained from the microstructure literature during Xetra’s planning period (1994–1997), and Xetra’s implementation has marked a huge step forward for Germany’s equity markets. Nevertheless, academic research and the design of a real-world marketplace remain works in progress.

Security Market Microstructure: The Analysis of a Non-Frictionless Market

The Capital Asset Pricing Model describes a frictionless world characterized by infinite liquidity. In contrast, trading in an actual marketplace is replete with costs, blockages, and other impediments. Equity market microstructure focuses on how orders are handled and turned into trades in the non-frictionless environment. For over three decades, the literature has grown while, concurrently, trading systems around the world have been reengineered. After depicting the frictionless CAPM, we consider the development of microstructure analysis, concentrating on issues germane to market architecture. We then consider the design of one facility, Deutsche Borse’s electronic platform, Xetra. Important insights were gained from the microstructure literature during Xetra’s planning period (1994–1997), and Xetra’s implementation marked a huge step forward for Germany’s equity markets. Nevertheless, academic research and the design of a real world marketplace remain works in progress.