Study Of The Return And Influencing Factors Of China’s Private Equity Investment That Exited Through Domestic IPO

Private equity investment originated in the United States in the1940s, is one of the most successful innovations in the field of global financial achievements in the20th century. After60years of continuous development, private equity investment has become one of the most important part of the global financial markets. It is widely used to broaden the financing channels for enterprises, especially for small and medium-sized enterprises in the venture and growth stage, which need financial support urgently. Now, Private equity investment is a very important means of financing after the bank loans and the stock market financing. At the same time, private equity investment provide a new investment channels for idle funds, promote the redistribution of capital and risk, and play a very important role in the financial system.The history of China’s private equity investment activities is much shorter, the earliest date was back to the mid-1980s according to available records, the main promoters of the early venture investment were the Science and Technology departments and the financial departments of the government at all levels. These venture capital firms were just appendages of the government agencies, which belongs to non-market participants of private equity investment.With the continuous development of the domestic economy as well as the deepening of market-oriented reforms, the field of domestic private equity investment entered into a new stage of rapid development. Since the21st century, along with several relevant supporting policies being launched, the SME board the GEM broad have been launched, more and more foreign investment and private capital began to enter the field of private equity investments. Especially after the launch of the GEM, which provided a new exit channel for investors, more and more investors were attracted by the high rate of return, a steady stream of large capital invested in the private equity market, the era of the "universal PE" is coming. After20years’development, Chinese private equity market has entered into a prosperous period, and became the world’s second largest market after the U.S. private equity market.Same with other investments, private equity investment is a resource allocation process, the final purpose is through the efficient allocation of capital to achieve value-added, in order to gain a high investment return. Since most of the private equity investment funds are in closed operation, and hence not required to disclose investment information. As the result, most investors can not know the true return of the private equity investment, and also the factors that affect the return on investments. This paper starts from these two perspectives, use the IPO data of the SME board to find out the true return of private equity investment that exited through IPO. Then through empirical analysis this paper further explores the relevant factors affecting the level of return on private equity investment. The study results will provide some functional references for investors.In this paper there are a total of six chapters, each chapter reads as follows:Chapter1, Introduction. This chapter clarifies the research background and significance, introduction and comparative academic research on private equity investment income return from domestic and foreign scholars. At the same time, the chapter briefly introduces research ideas, content, and the main research methods, as well as innovation of this paper and inadequacies of this paper.Chapter2, Overview of private equity investment. In the beginning of this chapter, author states the definition of private equity investment, from two perspectives of "private" and "equity" to describe the concept of private equity investment, and introduction the features of private equity investment. Subsequently, the paper introduced the fund raising forms, investment patterns and exit ways of private equity investment respectively. Finally, this chapter details the origin, development process and development status of domestic and foreign markets of the private equity investment, and focuses on the status of China’s private investment market and legal environment.Chapter3, Assumptions and model design. Firstly, this chapter describes the calculation method of the return on private equity investment. Then, combined with domestic and foreign scholars’ research results, as well as the development status and characteristics of the domestic private equity market, this chapter proposed11assumptions respectively from the relevant factors of the investment model, the enterprise features and private equity investment enterprises characteristics.Chapter4, Variable selection and sample description. Firstly, this chapter introduces sources of the empirical sample data, puts forward the variables depend on the assumption of the third chapter. Then, according to the nature of each variable, this chapter describes the descriptive statistics. The results show us the real status of private equity investments and investment institutions in China.Chapter5, The empirical analysis of the influencing factors of return on Private equity investment through IPO exit. Firstly, this chapter makes some single-factor analysis of relevant variables, and draws some preliminary conclusions. Then, from four aspects the author makes8multiple regression models to do empirical analysis and draw the appropriate conclusions.Chapter6, Further discussion and suggestion of private equity investment. Based on the previous study, this chapter makes some suggestions of China’s private equity investment market:1)Improve the private equity investment exit environment and establish a multi-level capital market, include the exchange market and the OTC market;2)Change the philosophy of investment and make focus on the potential of enterprises.3) Improve the external environment of the private equity market, and promote the standardized development of the industry,Chapter7, Conclusions. The chapter summarizes the return of private equity investment in China by domestic capital market IPO and the influencing factors on the return. Then, author provides some suggestions on the development of Chinese private equity market. Meanwhile, the chapter explains the problems and limitations in this study.The main contributions of this paper:1. This paper uses large amounts of the SME board listed company data to make the results much more closer to the real situation,which accurately reflects the development of Chinese private equity market.2. This paper uses theoretical and empirical research methods, combined with China’s actual situation and large number of domestic and international literature researches, put forward a number of hypotheses to enrich the research content.3. This paper selects variables from the influencing factors of three plates, to find out real influencing factors on private equity investment return. 4. On the basis of private equity investment through domestic IPO exit, this paper makes further discussion and suggestion of China’s private equity investment market, which makes sense of the Standardized development of the domestic private equity investment。The defects of this paper are as follows:because the trading information of private equity investment institutions are private, author can only use some other indirect channels to collect the relevant data which may cause some deviations on the accuracy of the dataset. In addition, the paper only study the sample data of SME board, while our domestic capital market has been established a multi-level capital market including our current the main board, the SME board and GEM board, hence only studying one board may not show the situation of China’s private equity investment completely.