![]() This type of acquisition has natural characteristics such as low liquidity, expectation of higher returns in the long-term and higher risk. Private Equity (PE) can be defined as business investments in companies that are not listed in the stock market. ![]() And final section presents the conclusions. ![]() The empirical results are interpreted in fourth section. Third section shows the methodology aspects concerning dataset, multivariate data analysis and the models. The paper is structured as follows: The next section explains the market functioning and summarizes the findings of the existing evaluation of key drivers of the PE/VC. Different from expected, the economic activity was negative significant to demand side. Other significant factors were the protection of investors, environmental development and the level of entrepreneurship. The results indicate that investments are adversely affected by the depth of the capital market: PE/VC funds search for an exit strategy that the stock market can offer by means of IPOs (Initial Public Offering). We then exploited regressions made up of 25 countries over a six-year period (2006-2011). These factors include macroeconomic, financial, corporate governance, entrepreneurship, social and environmental development variables. Using Factor Analysis, we modeled variables that possibly affect the demand of the PE/VC. Twenty-five variables were chosen consistent with the existing literature. To achieve it, we separately analyzed the supply and demand sides of transactions. The main goal of this paper is to understand which factors influence the PE/VC market. Therefore, it is the theoretical gap that this study seeks to fill: through the investigation of the factors influencing supply and demand PE/VC, it is possible to understand what makes a country more interesting for the attraction of international capital. So, it is intuitively possible to assert that countries will battle for international investments of PE/VC in an attempt to bring these resources to their market by creating attractive conditions for PE/VC managers. The fundraising and resource allocation process by PE/VC funds can boost the internal market of a country. Brazil, China and India, for example, have created conditions for the development of the PE/VC activity, hence, they are the ones that have been successful in fundraising (Bain & Company Inc., 2013). One possible reason could be the search for different paybacks in economies that go through an economic and institutional maturity, given that developed markets have been evidencing a decrease in profitability levels, since the 1990s ( Comodo, 2009).ĭespite it being widely disseminated around the world, the PE/VC activity is mostly concentrated in the United States of America and the United Kingdom, which together account for approximately 60% of the raised capital, although there has been a continuous reduction in the difference, compared to other countries. The Private Equity/Venture Capital (PE/VC) industry has grown in recent years especially in developing economies, where a considerable increase in financing activities has been observed. Keywords: private equity, venture capital, factor analysis. Taxation was also not significant to the demand side, a fact which denotes that the government can influence the local PE/VC market, and that it should offer high enough discount rates or tax incentives to mitigate the effect of other barriers faced by the PE/VC market. The result seems controversial but its lack of significance highlights the importance of the capital market (through IPOs as a way of disinvestment) as a key driver of the PE/VC market. ![]() Different from expected, the economic activity was of low impact on demand. Other significant factors were protection of investors, social and environmental development and level of entrepreneurship. The results indicate that investments are adversely affected by the depth of the capital market: the PE/VC funds seek an exit strategy which the stock market offers through IPOs (Initial Public Offering). The resulting factors were used in econometric models for investigating relationships among said factors and the fundraising of PE/VC funds first, and then with the amount invested by PE/VC funds. These factors were defined through 25 variables and transformed into five factors by factor analysis. Six factors were identified through Factor Analysis: Economic Activity, Development of Stock Markets, Corporate Governance, Social and Environmental Development, Entrepreneurship and Taxation. This study investigates determinants for the demand and supply for PE/VC funds. ![]()
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