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FINANCIAL MARKET IMPERFECTIONS, CONTROL AVERSION AND VENTURE CAPITAL IN SPANISH SMEs
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Fabio Bertoni 
, María Alejandra Ferrer , José Martí Pellón
Abstract
Information asymmetries and control aversion limit the capacity of Small and Medium Enterprises (SMEs) to take advantage of growth opportunities. In this work we analyse to what extent Venture Capital (VC) can play a positive role by allowing a temporary shareholder to reduce the investment dependency on internally generated funds. We study a sample of 322 Spanish VC-backed SMEs at the expansion stage, and a one-by-one matched sample of non-VC-backed firms. We find that both groups of firms exhibit a significant sensitivity of investments to cash flows before the initial VC investment. VC, however, is effective in reducing investment cash flow sensitivity in the post-investment period in the group of VC-backed companies.
Keywords: Venture Capital, Small and Medium Enterprises, Control Aversion, Investment Sensitivity to Cash Flow
How to cite this paper: Bertoni, F., Ferrer, M. A., Martí Pellón, J. (2010). Financial market imperfections, control aversion and venture capital in Spanish SMEs. Corporate Ownership & Control, 7(4-2), 252-265. https://doi.org/10.22495/cocv7i4c2p2
