Venture capital as innovative source of financing equity capital after the financial crisis in Spain

The global financial crisis affected the supply of funds to finance equity capital, thus calling for innovative risk capital financing methods. The paper explores the sources of venture capital (VC henceforth) fundraising and determines the relationship between VC fundraising, stock market returns,...

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Bibliographic Details
Published in:Cogent business & management 2022-12, Vol.9 (1), p.1-21
Main Authors: Frimpong, Fauna Atta, Akwaa-Sekyi, Ellis Kofi, Sackey, Frank Gyimah, Solé, Ramon Saladrigues
Format: Article
Language:English
Subjects:
Accounting
Banking
Capital markets
Economic crisis
Economic growth
Entrepreneurial finance
Entrepreneurs
Entrepreneurship
Equity capital
Equity financing
Fund raising
Fundraising activities
International finance
Microfinance
Risk capital
Securities markets
Spanish economy
Stock exchanges
Stock market returns
Venture capital
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Summary:The global financial crisis affected the supply of funds to finance equity capital, thus calling for innovative risk capital financing methods. The paper explores the sources of venture capital (VC henceforth) fundraising and determines the relationship between VC fundraising, stock market returns, and market capitalization in Spain. The study uses time-series data of VC fundraising and stock market variables from 1989 to 2020 in a vector error correction model analysis after performing cointegration. The paper reports short-run and long-run causal relations between VC fundraising, stock market returns, and market capitalization when VC fundraising and stock market returns are used as dependent variables. However, such relations do not exist when the model is dependent on market capitalization. Our results show that the VC market raises funds from diversified (geographical and institutional) sources. Our findings support the risk diversification theory of VC financing. The paper provides implications for using alternative innovative ways of financing equity risk capital to spur economic growth.
ISSN:2331-1975
2331-1975
DOI:10.1080/23311975.2022.2087463