Study On The Corporate Valuation Model And Its Application In Chinese Private Equity Investment

At present, the private equity investment industry is experiencing the rapid development, but in our country it still belongs to an emerging industry. It has been ten years since China’s first PE investment case. The development time is short, so theoretical research and practical applications are in the exploration, development and improvement. Due to the relatively short history of private equity investment, the systematic research on the current private equity investment pricing before listing is minimal. Therefore, this paper took that as a starting point and launched a combing and analysis on the development status, pricing factors and pricing methods of Chinese private equity investment, expecting to provide some reference for future research and practice.Firstly, this paper describes the background, purpose and meaning, domestic and international research studies, research ideas and methods, and the paper frame.Secondly, this article explains the theoretical foundation of private equity investment in corporate valuations and analyzes the applicability of commonly used valuation methods. The second chapter firstly defines the main concepts of this paper, including private equity meaning, features, functions and forms of organization and the meaning of business valuation. Then, it explains the basis of business valuation theory:the theory of enterprise value determination (value theory of utility, value theory of cost, value theory of supply and demand equilibrium) and the classical theory of valuation (asset-based approach, discounted cash flow method, the relative valuation method, option pricing method). The third chapter made analysis and evaluation on the current status of domestic business valuation in PE investments certain, and made comparative analysis on the common used PE valuation methods. In addition, it discusses the application of various methods and then assesses defects and deficiencies of the classic method used in the presence of Chinese enterprises, in order to introduce the enterprise valuation models in PE investment.Again, the fourth chapter, as the focus of this paper, explores new enterprise valuation ideas in PE investment. This section presents the important factors that affect the companies’ valuation in private equity investments, uses the empirical methods to build a relationship model about business valuation in PE investment and its influence factors, and obtains coefficients by linear regression model. In addition, this paper introduces the random signal PE investment valuation model, combined with case analysis of the model in Chinese enterprise evaluation to verify the authenticity, validity and rationality of the theory. Although evidence has not been tested, many of the cases show that these two models have a relatively broad application space in China.Finally, this paper summarizes the conclusions, pointing out the problems hard to solve in this study, and making recommendations for further research work in this research direction. This paper proposes that the new model of business valuation is not entirely negative of the classical valuation theory. It is based more on the development of Chinese industry and a supplement of the classical valuation theory. The two is not impossible of coexistence, and even they need to be combined in order to estimate accurately in many cases.