Private Equity Involvement Of The Financial Impact Of The Enterprise

With the share-trading reform, new Partnership Enterprise Law’s revise and ChinaNext board establishing, the stock market became rather flourishing. Private equity (PE) industry also developed in an amazing speed. The quatity of PE expanded from dozens to about3,000. Hence, it was named by "universal PE". In the driving of earning quick money, were the PEs crazy? Why did the companies accept the short investment of PEs?In this paper, I firstly gave the definition of PE according to my research. Then1reviewed the related foreign and native scholars’research on the effect of company’s performance and IPO’s underpricing by PE. In the next part, the contributions that PE can bring to the company were analyzed. In the empirical part, I chose the samples listing in ChinaNext board on October30,2009to December31,2011. And the samples were divided into PE-backed companies and no PE-backed companies. I employed the independent sample test to analyze the difference on the performance between two groups. The result was that there was no significant difference between them. Further, I divided the samples by PE’s shareholding ratio and found that companies’performance with PE’s high share ratio was better than no PE-backed companies. Then I used the logistic regression to find whether the PE’s participation will influence the IPO approval probability. The result gave me a surprise that the PE’s participation would increase the pass probability. However, with the Multiple linear regression to examine the relationship between PE and IPO underpricing, I found that compared to the companies with no PE holdings, the companies with PE holdings had greater underpricing which lead to a higher financing cost for the companies. Further, I discussed the effect on the IPO underpricing by PE’s different background. Many evidences argued that the foreign PE had more experience on improving company’s management level and monitoring skills. I found that there were significant difference between foreign PE and native PE. Foreign PE could help companies lower the degree of the underpricing. In a word, the contribution PE can bring to the company was little except for the steady listing that the PE can provide. Finally, I made a conclusion toward the empirical results and gave some advices.