Journal Article

Analysing the uneven development of private equity in Europe: legal origins and diversity of capitalism

Nicolas Bedu and Matthieu Montalban

in Socio-Economic Review

Published on behalf of Society for the Advancement of Socio-Economics

Volume 12, issue 1, pages 33-70
Published in print January 2014 | ISSN: 1475-1461
Published online June 2013 | e-ISSN: 1475-147X | DOI: https://dx.doi.org/10.1093/ser/mwt011
Analysing the uneven development of private equity in Europe: legal origins and diversity of capitalism

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Based on the literature on the diversity of capitalism (DoC) and legal origin (LO), this article examines the role of institutional configurations in the uneven development of private equity (PE) in 18 European countries. The article shows that developed stock markets, the ability of limited partners (insurance companies) to invest in LBO funds and low employment protection are more important determinants than investor protection in the case of LBO investments. However, venture capital (VC) investments are found to be positively associated with investor protection but also with developed stock markets and favourable tax rates for managers. R&D tax incentives for investee companies are found to have a negative impact on VC investments, which are nonetheless promoted by public R&D expenditures. Even if national institutional configurations matter in explaining differences, as emphasised by LO and DoC, we observe a common trend in PE development and financialisation.

Keywords: financial institutions; financialisation; varieties of capitalism; law; institutional complementarity; Europe; G24 investment banking; venture capital; brokerage; ratings and ratings agencies; K4 Legal Procedure; the Legal System; and Illegal Behavior; P51 comparative analysis of economic systems

Journal Article.  12141 words.  Illustrated.

Subjects: Economic Sociology ; Political Economy ; Welfare Economics ; Corporate Social Responsibility ; Moral Philosophy

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