Macroeconomic factors and venture capital market liquidity: evidence from Europe*
The relationship between macroeconomic factors and stock market liquidity is known but not the same can be said of macroeconomic factors and VC market liquidity. This study investigates whether there is a cointegration between macroeconomic factors and VC market liquidity and examines how macroecono...
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| Format: | Article |
| Language: | English |
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Taylor & Francis Group
2024-12-01
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| Series: | Cogent Economics & Finance |
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| Online Access: | https://www.tandfonline.com/doi/10.1080/23322039.2024.2401477 |
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| author | Fauna Atta Frimpong Ellis Kofi Akwaa-Sekyi Ibrahim Suleman Anyars Akua Peprah-Yeboah Ramon Saladrigues Sole |
| author_facet | Fauna Atta Frimpong Ellis Kofi Akwaa-Sekyi Ibrahim Suleman Anyars Akua Peprah-Yeboah Ramon Saladrigues Sole |
| author_sort | Fauna Atta Frimpong |
| collection | DOAJ |
| description | The relationship between macroeconomic factors and stock market liquidity is known but not the same can be said of macroeconomic factors and VC market liquidity. This study investigates whether there is a cointegration between macroeconomic factors and VC market liquidity and examines how macroeconomic factors affect VC market liquidity. We perform a panel fully modified OLS regression analysis after carrying out panel cointegration on a country-level dataset of 22 EU/EEA countries from 2000 to 2020. There is a long-run covariance between VC market liquidity and macroeconomic variables. Specifically, a 1% expansion in the size of the economy would lead to 0.652%, 0.927%, 0.661%, 0.723%, and 0.755% increase in VC market liquidity measured by exits through trade sales, IPOs, sales to PE firms, financial institution and MBOs, respectively. The European VC market is progressively increasing in liquidity as can be seen in the UK, France, and Germany. We report that as the size of the economy and money supply increases, VC market liquidity increases. Interest rate is significantly inversely related to VC market liquidity. The result is mostly significant for some exit strategies such as trade sales and IPOs. However, on the whole, inflation and unemployment do not significantly relate to VC market liquidity. This article has practical implications for venture capitalists and investors. It informs investors on which exit route has a significant relation with macroeconomic variables in Europe. The study effectively shows the aggregate impact of the macroeconomic conditions which is usually not the case with firm-level data. |
| format | Article |
| id | doaj-art-49811da09fdf46fca7b8830a83a8ef96 |
| institution | OA Journals |
| issn | 2332-2039 |
| language | English |
| publishDate | 2024-12-01 |
| publisher | Taylor & Francis Group |
| record_format | Article |
| series | Cogent Economics & Finance |
| spelling | doaj-art-49811da09fdf46fca7b8830a83a8ef962025-08-20T01:54:33ZengTaylor & Francis GroupCogent Economics & Finance2332-20392024-12-0112110.1080/23322039.2024.2401477Macroeconomic factors and venture capital market liquidity: evidence from Europe*Fauna Atta Frimpong0Ellis Kofi Akwaa-Sekyi1Ibrahim Suleman Anyars2Akua Peprah-Yeboah3Ramon Saladrigues Sole4Department of Business Administration, University of Lleida, Lleida, SpainDepartment of Accounting and Finance, Kwame Nkrumah University of Science and Technology, Kumasi, GhanaDepartment of Economics, Kwame Nkrumah University of Science and Technology, Kumasi, GhanaDepartment of Accounting and Finance, Kwame Nkrumah University of Science and Technology, Kumasi, GhanaDepartment of Business Administration, University of Lleida, Lleida, SpainThe relationship between macroeconomic factors and stock market liquidity is known but not the same can be said of macroeconomic factors and VC market liquidity. This study investigates whether there is a cointegration between macroeconomic factors and VC market liquidity and examines how macroeconomic factors affect VC market liquidity. We perform a panel fully modified OLS regression analysis after carrying out panel cointegration on a country-level dataset of 22 EU/EEA countries from 2000 to 2020. There is a long-run covariance between VC market liquidity and macroeconomic variables. Specifically, a 1% expansion in the size of the economy would lead to 0.652%, 0.927%, 0.661%, 0.723%, and 0.755% increase in VC market liquidity measured by exits through trade sales, IPOs, sales to PE firms, financial institution and MBOs, respectively. The European VC market is progressively increasing in liquidity as can be seen in the UK, France, and Germany. We report that as the size of the economy and money supply increases, VC market liquidity increases. Interest rate is significantly inversely related to VC market liquidity. The result is mostly significant for some exit strategies such as trade sales and IPOs. However, on the whole, inflation and unemployment do not significantly relate to VC market liquidity. This article has practical implications for venture capitalists and investors. It informs investors on which exit route has a significant relation with macroeconomic variables in Europe. The study effectively shows the aggregate impact of the macroeconomic conditions which is usually not the case with firm-level data.https://www.tandfonline.com/doi/10.1080/23322039.2024.2401477VC market liquidityVC exitsmacroeconomic factorscointegrationFMOLSFinance |
| spellingShingle | Fauna Atta Frimpong Ellis Kofi Akwaa-Sekyi Ibrahim Suleman Anyars Akua Peprah-Yeboah Ramon Saladrigues Sole Macroeconomic factors and venture capital market liquidity: evidence from Europe* Cogent Economics & Finance VC market liquidity VC exits macroeconomic factors cointegration FMOLS Finance |
| title | Macroeconomic factors and venture capital market liquidity: evidence from Europe* |
| title_full | Macroeconomic factors and venture capital market liquidity: evidence from Europe* |
| title_fullStr | Macroeconomic factors and venture capital market liquidity: evidence from Europe* |
| title_full_unstemmed | Macroeconomic factors and venture capital market liquidity: evidence from Europe* |
| title_short | Macroeconomic factors and venture capital market liquidity: evidence from Europe* |
| title_sort | macroeconomic factors and venture capital market liquidity evidence from europe |
| topic | VC market liquidity VC exits macroeconomic factors cointegration FMOLS Finance |
| url | https://www.tandfonline.com/doi/10.1080/23322039.2024.2401477 |
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