The Impact Of Private Equity On The Growth Of Enterprises

Private equity investment is the third largest business financing mode which is only next to bank loans and public offerings.It has been developing rapidly in recent years,providing effective financing ways for Chinese start-ups.Private equity investment not only provides funds for start-ups,but also goes deep into the internal management of enterprises,improving corporate governance structure and operation management,and promoting the growth of enterprises.At the same time,due to the steady development of China's economy in recent years,the number of middle class in China has increased as well as investment demand,which has also promoted the development of China's private equity fund industry.Private equity investment fund plays an important role in the growth of small and medium enterprises in recent years.A lot of start-up enterprises,small and medium enterprises have successfully grown and become a public listed company with the help of the private equity fund.At present,the introduction of the private fund has even become a huge bargaining capital of start-ups.However,some scholars believe that the goal of private equity investment is withdrawing from enterprises as early as possible,rather than maximizing the value of enterprises,which will have a negative impact on the subsequent operation of enterprises.In order to analyze the impact of the private equity investment on the growth of enterprises,the author uses theoretical analysis as well as empirical analysis methods.The main contents of this paper are as follows.First of all,the author reviews the existing research results and determines the research direction.Secondly,the author intends to discuss the concept,characteristics and development of the private equity investment.Thirdly,the author intends to analyze and summarize the existing theory of the path and the effect of private equity investment influencing the growth of enterprises.Fourthly,the author intends to discuss the topic through the empirical analysis.Finally,the author intends to combine the results of theoretical analysis and empirical analysis and make a suggestion.In the part of the theoretical analysis,the author expounds the certification and supervision effect and the signal transmission effect in detail,which are two major theories explaining the impact of private equity investments on the growth of enterprises.In the empirical analysis,the author selects companies listed on GEM from 2015 to 2016 as samples,and selects the composite growth rate of main business income as explained variable.At the same time,the author choose private equity fund participation,private equity shareholding ratio,private equity shareholding time,private equity number and private equity reputation as explanatory variables.In order to eliminate the interference of the enterprise's own factors to the test and fit the model better,the author selects the ownership concentration ratio,the asset turnover ratio,the asset liability ratio and the total assets compound growth rate as the control variables.The regression results show that private equity does have significant positive effect on the growth of enterprises,and the longer the private equity holds,the better the reputation of private equity is,the better the positive effect is.However,the number of private equity and private equity shareholding ratio have no significant effect on the growth of enterprises.Therefore,the author puts forward suggestions from two aspects:financing enterprises and private fund management enterprises.For the financing enterprises,first of all,start-ups with high growth should actively seek for private equity investment,which is not only to solve the financing difficulties of the enterprises and realize the expansion and development of the enterprises,but to improve the management and operation of enterprises through private equity fund and improve the competitiveness of enterprises and ultimately be on the market.Secondly,the enterprises should introduce private equity sooner rather than later.Compared to the founders of the companies,private equity often have more experience in enterprises management and business operations as well as abundant market resources.The earlier the perfect business operation gene goes into the enterprises,the more beneficial it will be for the enterprises.Finally,when financing enterprises seek private equity investment,they should choose the private equity fund with better reputation,especially the large private equity that are fully recognized by the industry.These large private equity often steep in this industry for many years,and have deeper understanding of the external environment and internal governance of start-ups,also have abundant market resources.For private equity,first of all,they should choose to enter the financing enterprises at the initial stage of their life circle,and the earlier they enter the business,the lower the cost is,and the greater the profits they will get after IPO.This will also helps private equity to find the ceiling of the enterprise earlier,and change or withdraw as soon as possible in order to control the loss.Secondly,private equity should strive to provide supervision and assistance for each financing enterprises,this is not just for a successful exit,but also to establish a good reputation and raise more funds in the next round.