Disclosure, Venture Capital and Entrepreneurial Spawning

Venture capital funds have been facing increasing regulatory scrutiny since the 2007 financial crisis, particularly in respect of calls for increased disclosure requirements. In this paper, we examine whether more stringent securities regulation helps or hinders the supply and performance of venture capital as well as new business creation (i.e., entrepreneurial spawning). Based on data from 34 countries over the years 1999-2008, we find more stringent regulation, in particular disclosure, has a positive impact on the supply and performance of venture capital around the world, and a positive impact on entrepreneurial spawning induced by venture capital.