The Choice Of The Organizational Form Of Private Equity Investment In China

Private equity investment is a hot topic in the field of financial investment. It is just starting to expand in China's capital market. It means carrying equity investment upon the shares of non-listed enterprises by private placement and selling the shares through listing, mergers and acquisitions or management repurchase so as to make profit. Private equity investment institution plays as the main body of investment. The level of its operational efficiency to a large extent determines the success or failure of investment, while the efficiency of investment institutions is dependent on the organizational forms and systems. At present, there are three major conventional organizational forms of private equity investment, namely, corporate form, indenture form and limited partnership form, which demonstrate quite different efficiencies owing to the different institutional arrangements.This thesis first analyses the three organizational forms and their own characteristics theoretically as well as practically, followed by the development of private equity investment market and the status quo of the organizational forms of the investment institutions. On the basis of the above introduction, the writer puts forward the criteria of valuing the efficiency of organizational forms of private equity investment institutions and analyzes the major factors which influence the choice of the forms mentioned above. Then after analyzing and comparing the three organizational forms in accordance with the factors, the writer draws a conclusion that limited partnership is the most efficient organizational form employed by private equity investment institutions. However, the writer holds the opinion that the most efficient is not necessarily the most suitable, for it requires a proper environment. Therefore, it is a must that the adaptability of the limited partnership in current Chinese market should be analyzed, including the necessary conditions the form requires, and the conditions available in China at present. Then the writer draws the final conclusion that in China the private equity investment may start to employ the form of limited partnership, but the combination of the two forms of the limited partnership and trust can be implemented as the organizational form of China's current private equity investment model since it can be more feasible and exert the merits of the two.