Research Handbook of Finance and Sustainability
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Research Handbook of Finance and Sustainability

Edited by Sabri Boubaker, Douglas Cumming and Duc K. Nguyen

The severe consequences of the global financial crisis 2008-2009 and numerous accounting frauds and financial scandals over the last fifteen years have let to calls for more ethical and responsible actions in all economic activities including consumption, investing, governance and regulation. Despite the fact that ethics in business and corporate social responsibility rules have been adopted in various countries, more efforts have to be devoted to motivate and empower more actors to integrate ethical behavior and rules in making business and managerial decisions. The Research Handbook of Finance and Sustainability will provide the readers but particularly investors, managers, and policymakers with comprehensive coverage of the issues at the crossroads of finance, ethics and sustainable development as well as proposed solutions, while focusing on three different levels: corporations, investment funds, and financial markets.
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Chapter 16: Examination of the relationship between venture capital and economic growth in emerging markets

Guldem Gokcek

Abstract

It is true that venture capital drives job creation and economic growth as well as innovation. It is expected that high-growth economies create higher entrepreneurial activity in these countries. This could be true for developed markets but is it also valid for emerging markets? Emerging markets were created due to the failure of state-led economic development, and the need for capital investment. It has been observed by many experts in the area that emerging market countries have been trying to undertake domestic reforms to support sustainable economic growth. It is expected that if the economy grows quickly, then there may be more attractive opportunities for entrepreneurs to start new companies, thereby increasing the demand for venture capitalists. However, venture capital sectors as well as management styles of venture capitalists differ across countries. There are also factors that affect venture capital in emerging markets such as depth of capital markets, initial public offerings, labor market rigidities, pension funds, macroeconomic factors, legal systems, taxation, and political factors. Therefore, the literature is divided into groups based on the factors that affect venture capital in emerging markets, and the survey is organized accordingly to examine behavior of venture capitalists in emerging markets. This research is concluded by determining how venture capitalists make funding decisions in emerging markets and how behavior of venture capitalists helps economic growth in emerging markets.

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