Study On Exit Decision Of Private Equity In China

Private equity, is a type of financial intermediary that investors makes equity investments inprivate company (i.e., non-listed companies) and provide value-added services and finallymake a profit through the exit of the fund, such as Initial public offering, mergers andacquisitions or management buy-back. A appropriate exit decision is one of most importantproblems and of great significance for private equity projects, because only with smooth andsound exit mechanism can we ensure to realized investment gains and lock investment losses.The common exit mechanism in developed countries is mergers and acquisitions, while thedomestic market still remain in solely Pre-IPO mode. However, the boom period relying on thegrowth of the overall economy and the incremental effect of this industry has come to an end. Inthe following stage, the listing condition will be more strictly and meanwhile returns of IPO willbecome more rational. Chinese private equity investment is now facing a test of exit channel.Research on how to make the exit decision and its main influencing factors can explorecurrent Situation and Problems from the exit stage. Based on the summarization of previousstudies, this paper is an analysis of each influencing factor from three aspects includingfinancing ventures， private equity institutions and investment event features based on anempirical analysis using2003to2012investment project information form万得database,through a combination of qualitative and quantitative research methods. Hope to provide somereference to private equity investment theory and practice. The study suggests that it is of highpossibility of exit via IPO if PE invest in an large sized and older company. The overseas-fundedPE is more often associated with acquisition. When there are more than one PE invested thepossibility of IPO will be higher. And the external market environment, including the financialcrisis, the launch of the GEM have a significant impact on the exit decisions, meanwhile, PEinstitutions operating time, Venture Capital/Private Equity(in a limited sense) classification,state owned/private owned classification have no significant effect on the exit decisions.