Private Equity Investment Of Chinese Smes

The Chinese small and medium-sized enterprises(SMEs) are severely impacted in the context of the world economic crisis,with their financing difficulties brought in the foreground.To solve the problem,it is of great significance to discuss the role played by private equity(PE).On one hand,as the supplementary financing instrument between securities and bank loans,PE has been deployed to address the agency dilemma of SMEs,improve the corporate governance,accelerate the process of technological innovation,and promote the industrial structure upgrading.It also rationally allocates the capital market resources,exploits new financing channels,cultivates the entrepreneur spirits and explores the excellent entrepreneurs.On the other hand,it is highly necessary to consider whether the Chinese enterprises have benefited from PE which is an import from mature capital markets.This paper is aimed to analyze the influence on the SMEs of PE from theoretical and empirical angles.Employing the method of comparative analysis,it reveals the real effects of PE in China's capital market.In Chapter One,the paper describes the background and writing thoughts briefly, simultaneously pointing out the innovation and limitation.In Chapter Two,it elaborates the theoretical foundation focusing on the attributes and influences of PE. In Chapter Three,by dividing the SMEs' samples of Shenzhen Securities Exchange into two segments,one of which are PE/VC backed with the other not PE/VC backed, the paper explains the empirical effects of the PE from under-pricing measurements and long-run performance respectively.The results demonstrate that PE does not present the theoretical effect in China.In Chapter Four,the paper reaches conclusions and makes recommendations to the authorities.It suggests the authorities learning from the mature capital market experience all-round.In order to improve the effects of PE on SMEs,the paper makes propose that authorities need to increase the venture capital investments,develop multi-layered capital market system and enhance the corporate governance of SMEs.