An Empirical Analysis Of Syndication And Private Equity Investment Performance

The target of private equity investment is private enterprise’s equity, its operating carrier is private equity funds. Private equity investment fund acts as an intermediary role in the financial markets, just like a leverage. It comes into being a long term investment capital by focusing on the social idle funds, and invests the financing corporation to support its operation. Private equity is important driving force in the development of high-tech industry, also is the important support of the new economy and innovation, and the "engine" of economic growth, industrial reconstruction and technological change. With the development of the global capital markets, private equity investment has increasingly far-reaching influence. Private equity funds have played a very positive role in the national economy, capital markets and financing corporations, they promote the perfection of the capital market and the development of national economy, and provide a new operation mode for the financing corporations. The syndication is widely used in the private equity industry as a means to reduce risk.In the process of syndication, private equity investment fund formed a network, the main characteristics of the network are trust, sharing and mutual benefit, but its effect on the performance of investment is still not clear. From a theoretical perspective, the effects on the performance of private equity investment can be divided into two aspects:on the one hand, the syndication can avoid "black swan" events through risk diversification, information sharing, experience learning and mutual consultation; On the other hand, the network may have a moral hazard problem, hold up problem, free-rider problem and so on. These problems have negative effect on investment performance. Because the impact on the investment performance is still not clear, it is necessary for us to further explore.The development time of China’s private equity industry is shorter, syndication is an important strategy in private equity, one of the value of the paper is how to measure and research the forms of China’s private equity industry. On the other hand, Chinese and western market have different backgrounds, which makes the syndication network performance in our country may vary with mature market, the effect boundary of China’s private equity investment network may change, which is the other value of the paper. The paper regards Chinese private equity investment events as research object. And the research scope is not restricted by the nature of investment institutions, but rather from the financing ways of investment events. The paper researches investment institutions which involved in the events which financing way is "private equity". And then explore the syndication’s impact on the performance of private equity investment.The paper uses social network as the analysis tool, regards the syndicate network of private equity investment institutions from 2002 to 2011 as analysis object (involving 280 private equity investment institutions and 445 financing enterprises). And research the structure characteristics of the syndication network from the perspectives that centrality, structural hole, relationship stability and so on, probed into the special network location effects on the performance of private equity investment institutions. The empirical analysis results show that:1) The change of investment institutions position in the network will affect investment performance significantly. The improvement of centrality degree contribute to improve the investment performance; 2) If the information exchange mechanism of the syndication network is structural hole, it may result in a loss of the whole investment performance because of the emergence of various problem, which leads to the investors in the location of a center node can’t fully acquire the benefits of information intermediary, instead, it may reduce the investment performance of the individual due to the decline in overall performance; 3) The more a private equity investment institutions is limited by a syndication network, the lower its investment performance; 4) The quality of the relationship between investment institutions has no significant effects on dropout rates; 5) The investment performance of local institutions is better than foreign institutions; 6) Investment scale is helpful to enhance network centricity’s positive influence to exit rate. We can get the conclusion by the above analysis result:it is necessary to further promote syndication, but it should be more transparent in information exchange mechanism, while minimizing the various restrictions to investors. The paper enriches the syndication theory of private equity investment institutions, and adds the application situation of structural holes indicator in syndication network.