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Private Equity and Venture Capital Investment Attractiveness

Dahlman, Samuel LU and Esphabodi, Kimiya (2023) NEKH03 20222
Department of Economics
Abstract
This paper is a cross-country study on how national culture affects institutional private equity
and venture capital investments in Europe and is based on the previous works of Groh,
Liechtenstein and Lieser (2010) and Hofstede, Hofstede and Minkov (2011). We argue that
national culture affects capital allocation and that this parameter is often missing in the
contemporary discourse on the drivers of investments. This thesis thus aims to further explain
what makes some countries more attractive for institutional investors than others by
combining formal and informal institutions in a way that no previous study has done. Our
hypotheses test the effects that formal institutions and the cultural traits of power distance,
uncertainty... (More)
This paper is a cross-country study on how national culture affects institutional private equity
and venture capital investments in Europe and is based on the previous works of Groh,
Liechtenstein and Lieser (2010) and Hofstede, Hofstede and Minkov (2011). We argue that
national culture affects capital allocation and that this parameter is often missing in the
contemporary discourse on the drivers of investments. This thesis thus aims to further explain
what makes some countries more attractive for institutional investors than others by
combining formal and informal institutions in a way that no previous study has done. Our
hypotheses test the effects that formal institutions and the cultural traits of power distance,
uncertainty avoidance, masculinity and individualism have on private equity and venture
capital funding in Europe 2021. Additionally, we hypothesize that the effects of these differ
depending on country development level, hence the countries are grouped and studied
separately. To test the hypotheses, we use linear regression analysis for 33 European countries
by using 767 data points from 2015–2020. Our findings indicate that more developed
countries attract more capital during recession because of higher quality formal institutions.
As these countries grow more attractive relative to the rest of Europe, they attract funds at a
higher rate compared to less developed countries. Furthermore, less developed countries that
are more individualistic tend to raise higher volumes of funds, and certain cultural traits could
potentially have a greater impact on capital allocation in less developed countries when
compared to more developed ones. Thus, both formal and informal institutions can explain
why some European countries are more attractive for investment than others. (Less)
Please use this url to cite or link to this publication:
author
Dahlman, Samuel LU and Esphabodi, Kimiya
supervisor
organization
course
NEKH03 20222
year
type
M2 - Bachelor Degree
subject
language
English
id
9114738
date added to LUP
2023-06-07 10:48:26
date last changed
2023-06-07 10:48:26
@misc{9114738,
  abstract     = {{This paper is a cross-country study on how national culture affects institutional private equity
and venture capital investments in Europe and is based on the previous works of Groh,
Liechtenstein and Lieser (2010) and Hofstede, Hofstede and Minkov (2011). We argue that
national culture affects capital allocation and that this parameter is often missing in the
contemporary discourse on the drivers of investments. This thesis thus aims to further explain
what makes some countries more attractive for institutional investors than others by
combining formal and informal institutions in a way that no previous study has done. Our
hypotheses test the effects that formal institutions and the cultural traits of power distance,
uncertainty avoidance, masculinity and individualism have on private equity and venture
capital funding in Europe 2021. Additionally, we hypothesize that the effects of these differ
depending on country development level, hence the countries are grouped and studied
separately. To test the hypotheses, we use linear regression analysis for 33 European countries
by using 767 data points from 2015–2020. Our findings indicate that more developed
countries attract more capital during recession because of higher quality formal institutions.
As these countries grow more attractive relative to the rest of Europe, they attract funds at a
higher rate compared to less developed countries. Furthermore, less developed countries that
are more individualistic tend to raise higher volumes of funds, and certain cultural traits could
potentially have a greater impact on capital allocation in less developed countries when
compared to more developed ones. Thus, both formal and informal institutions can explain
why some European countries are more attractive for investment than others.}},
  author       = {{Dahlman, Samuel and Esphabodi, Kimiya}},
  language     = {{eng}},
  note         = {{Student Paper}},
  title        = {{Private Equity and Venture Capital Investment Attractiveness}},
  year         = {{2023}},
}