Private Equity And Its Governance Research - Inspiration For The Reform Of State-owned Enterprises

This paper is mainly composed of three sections, the summarization of private equity (PE) investment, the governance research of PE investment, and the reference and impact of the application of PE investment to the reform of state-owned enterprises in China.In the first section, the concept and characteristics of PE investment is introduced first. There is a comparison between European definition and American one, and some main traits of PE investment are explained. Then, the core of PE investment, i.e. PE capitalist is discussed, especially the skills and competences they require. After that, it is the description of the evolution of PE investment primarily based on the American practice. At last, the process of buy-out and venture investment, i.e. the two types of PE investment, is presented respectively. Based on that, the value sources of PE investment are analyzed.The second one is the theoretical framework, focusing on the two aspects of governance of PE investment on the ground of the theories of the firms. Firstly, based on the theory by Professor Zhang Weiying, the marketing ability of both PE firms and portfolio companies under PE investment is analyzed. Secondly, a model is constructed on the basis of contract theory, beyond-property-right argument and competition theory. And in the perspectives of the model, analysis is conducted on how PE investment is used to motivate PE capitalist and the management of companies. At last, it is an empirical study of PE investment by a case.The last part of the paper is the application, with emphasis on some advices about the reform of state-owned enterprises in China. Firstly, it touches upon the evolution of the reform of state-owned enterprises, providing the macro background for further analysis. Secondly, it is the analysis of the reform of state-owned enterprises from the standpoint of governance, drawing the key issues of modern reform. Finally, based on illustrating a case and applying some effective practices of PE investment, a couple of suggestions and recommendations are given for the reform of state-owned enterprises.