NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Venture Capital Investments and Merger and Acquisition Activity Around the World

Gordon M. Phillips, Alexei Zhdanov

NBER Working Paper No. 24082
Issued in November 2017
NBER Program(s):Corporate Finance, Industrial Organization, Productivity, Innovation, and Entrepreneurship

We examine the relation between venture capital (VC) investments and mergers and acquisitions (M&A) activity around the world. We find evidence of a strong positive association between VC investments and lagged M&A activity, consistent with the hypothesis that an active M&A market provides viable exit opportunities for VC companies and therefore incentivizes them to engage in more deals. We also explore the effects of country-level pro-takeover legislation passed internationally (positive shocks), and US state-level antitakeover business combination laws (negative shocks), on VC activity. We find significant post-law changes in VC activity. VC activity intensifies after enactment of country-level takeover friendly legislation and decreases following passage of state antitakeover laws in the U.S.

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Document Object Identifier (DOI): 10.3386/w24082

 
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