Risk capital: a Leading Strategy to Fund Investment Projects in Algeria - Standard Model

Abstract

This study aims at assessing the impact of funding using risk capital on the profitability of investment projects, as it is considered one of the major solutions to the problem of financing projects in Algeria and an optimal alternative in light of Algeria’s financial needs. The study finds that there is a positive impact for this type of financing on the financial performance of the investment projects. However, these institutions are facing a number of obstacles to do their roles.  Through the construction of Standard model during the period (2002-2014), where the model connects between risk capital as a dependent variable to the revenues of the investment projects and their generated job opportunities,  The statistical results of the study concludes that the more the investments are funded by risk capital, the more they are likely to face bankruptcy, and failure to pay their liabilities. Thus, this relationship is an indication of the amount of risks that risk capital firms face in terms of the amount of funds provided to the projects, especially the ones with long time frame. Finally, this paper suggests approaches to empower risk capital institutions in Algeria