Determinants And Consequences Of PE Investments In Domestic IPOs: An Empirical Study

This study examines the role of Private Equity(PE) investments in Chinese capital markets. Using hand-collected data from 150 IPO firms evenly randomly selected during 2008 to 2010, this study employs Logit models to examine the determinants of PE investments, and regression models to investigate the effects of PE investments on post-IPO accounting performance.This study first provides an overview of the emergence and development of the PE industry, and presents descriptive statistics of PE investments, fund-raising and exits in recent years. Of the 150 IPO firms, 77 have PE investments, suggesting that PE investments are prevalent in Chinese IPO firms. The results of logit analysis show that PE investments depend on the IPO firms’ industry membership, profitability, and earnings growth. Further results indicate that PE investments are positively associated with IPO underpricing.