Market Performance Of Private Equity Backed Enterprises

In recent years, China’s private equity business has got rapiddevelopment, thanks to the vigorous support of government policies andthe launch of GEM. Choice of investment, project management, and exit,are the three aspects of private equity investment. From private equityfunds’ view, their goal is to exit from the project, realize the profits and gointo the next investment cycle. So market performance of private equitybacked enterprises will directly influence investment return. Therefore, thisarticle focuses on the impact of private equity on target enterprisesespecially their market performance after IPO, in order to make privateequity play a better role in our capital market.The study set private equity backed and non private equity backedIPO enterprises in Chinese A share market from2000to November2010as study sample. With paired sample and empirical methods, the articlediscovered the impact of venture capital on enterprises’ stock marketperformance. The result shows that private equity backed IPO enterpriseshave higher short-term stock returns than non private equity backed IPOenterprises, while “good” venture capital plays a role of certification,reducing IPO underpricing; in the long term, cumulative returns of privateequity backed and non private equity backed enterprises are notsignificantly different, representing that private equity does not fully playthe monitoring role to the enterprises.