An Empirical Study Of Private Equity Investment Impact On Enterprise Value Of Listed Companies

Private equity plays an increasingly important role in the world financial markets, which have a profound impact on a country’s economic development at the macro and micro levels. It is clear through PEdata, China’s equity market has been active in more than 500 institutional investors in 2005 to more than 8,000 in 2014. The amount of capital management is more than 4 trillion yuan. The market size has achieved a qualitative leap. In addition, theState Council carried out reformation of decentralizationand encourage innovation.Private equity investments will provide adequate financial support and value-added services for start-up companies.In this context, more and more scholars began to focus on the relationship between investment and private equity companies, research on how PE enhance corporate value has important practical significance.At present domestic research on private equity investments and business relationships are more concentrated in terms of corporate governance, business performance and other less research on how private equity investments enhance corporate value. In this paper, weintroduced private equity and enterprise value by theoretical analysis and in-depth empirical analysis. We explain that the differences in terms of investment period, PE background, shareholding ratio and joint investment affect the value of the corporation.The first chapter mainly describes the background and significance, the innovation point of this paper is determined by analyzing and summarizing the literature. In Chapter Ⅱ,the basic situation of private equity and enterprise value were introduced, first the definition of private equity, features and operation of the process, followed by introduction to the concepts and calculation methods of enterprise value. The third chapter introduced different course of development, industry and foreign present situation and running mechanism of the PE. The fourth chapter theoretically analyzes the main way to enhance the corporate value of private equity investments. For the above theoretical analysis, the fifth chapter verified the impact of private equity on corporate value from an empirical point of view. First, according to different situations and different characteristics of PE investment institutions,we raised five hypotheses.Then based on the assumption we selected Tobin’s Q index as a measure of corporate value, whether there will be PE participated in as an explanatory variable, while for private equity different characteristics, we choose stake, the investment period, foreign background, the background of state-owned and joint investment as a number of other explanatory variables. In addition, we select the size of assets etc. as control variables in econometric model. Also we select the Shenzhen Stock Exchange listed companies in recent years as the sample data, using STATA software for regression. The results showed that participating in private equity investment has improved corporate valuesignificantly. PE firms which have a foreign background can enhance corporate value becauseof their professional management, andthe state-owned background of PE institutions can also have a strong influence on corporate value. At the same time, both the proportion of private equity holdings and the investment period have impact on the corporate value obviously. PE investment can expand information sharing, access available resources and reduce agency costs. Therefore, it can significantly improve the corporate value of the invested enterprise. The last chapter summarized the foregoing findings andput forward three specific recommendations on three point of viewsto the government for research, private equity firms and corporate.This article studied not only private equity investment in the business and whether it helps enhance the value of this problem, but from the perspective of private equity firms characteristics, in-depth study of different backgrounds, different shareholding and investment horizon and a number of private agencies PE involved in the case of investment impact on corporate value. These results enrich the existing literatureand have an important referencefor government to guide the healthy development of private equity investment market.