The Study Of The Relationship Of Pe Duration And Its Corporate Post-IPO Performance

Since the official launch of the SMEs (Small and Medium-sized Enterprises) boardin Shenzhen Stock Exchange, Private Equity (PE) set off another round of investingwaves into the Chinese stock market. Taking the successful investment of American PENewbridge Capital to Shenzhen Development Bank as a beginning, PE has achieved anincreasing development. Wang Zhongmin, Vice-Chairman of the National Social SecurityFund Council, points in2013out that during the last stage of the Chinese Market-Orientation-Reform, PE will be in the most critical position.Based on the above background, the paper conducts a study of “how does PEduration influence its investing company’ post-IPO performance” through empiricalresearch. It takes387listed enterprises that IPO (Initial Public Offerings) by absorptionPE investment in Shenzhen Stock Exchange as samples, including224ones from SMEsfrom2005to2011, and163from the Growth Enterprise Market board (GEM) from2009to2011. After giving five gradual in-depth hypotheses, the paper makesdescriptive statistics, correlation analysis, and multiple regressions. The paper has foundthat PE duration positively influence its company’ post-IPO performance. As theshortened PE duration within one year, Quick flip leads to IPO speculation, in returns itsoverall corporate performance intends to decline. In addition, the reputation of PE playsan important role of influencing its duration. Apart from that, the existence of thephenomenon “a number of PE shareholders share the ride of IPO” cannot be proofed.Furthermore, there is no obvious evidence that there is a tendency between IPO marketconditions and PE duration.Results of this study not only validate the theoretical IPO effect, but also confirm theassumption that “there is a positive tendency of PE duration and its performance afterIPO” Meanwhile. The suggestions of how companies could take good advantage of PEand the policy recommendations of creating a beneficial investing environment areimportant to the development of China’s capital market.