The Macroeconomic and Environmental Determinants of Private Equity in Emerging Asia Market: The Application of Extreme Bounds Analysis

Oino, Isaiah

doi:10.11648/j.jim.20140303.12

Cited by 4 publications

(7 citation statements)

References 19 publications

(15 reference statements)

Supporting

Mentioning

Contrasting

Order By: Relevance

“…This positive effect is statistically significant at 5 percent level of significance. These findings are supported by a priori expectation, modern portfolio theory, Neo-classical of investment behaviour and the findings of Groh and Liechtenstein (2010), Clarysse et al (2009), Aizenman and Kendall (2008), Kelly (2012), Cherif and Gazdar (2011), Fé lix et al 2013, Oino (2014), Bernoth and Colavecchio (2014) and Oni (2017. This result is inconsistent with the finding of Oino (2014). From our findings, a strong capital market creates a favourable environment for PE exits through initial public offerings and the provision of valuation data for Merger and Acquisition deals.…”

Section: Discussion Of Regression Resultssupporting

confidence: 65%

“…Most research on the determinants of private equity activity has been on developed countries. Among them are the studies of Groh and Liechtenstein (2010), Kelly (2012), Aizenman and Kendall (2008), Clarysse, Knockaert, & Wright (2009), Guler and Guillé n (2010), Cherif and Gazdar (2011), Fé lix, Pires and Gulamhussen (2013), Oino (2014) and Bernoth and Colavecchio (2014). However, Oni (2017) conducted a study on the determinants of venture capital supply in Sub-Saharan Africa.…”

Section: Introductionmentioning

confidence: 99%

See 1 more Smart Citation

Macroeconomic Drivers of Private Equity Penetration in Sub-Saharan African Countries

Nkam¹,

Akume²,

Sama³

2019

IBR

View full text Add to dashboard Cite

The objective of this study is to investigate in to the drivers of private equity penetration in Cameroon, Nigeria, Ghana, Kenya and South Africa. Secondary data was collected from private equity and venture capital data bases (CapitalIQ, Preqin, Burgiss and Mergermarket), World Bank development indicators, regional private equity and venture capital associations and country specific stock market websites. The Panel Two-Stage Least Squares Instrumental Variables (2SLS IV), Panel Corrected Standard Errors (PCSE) and Feasible Generalised Least Squares (FGLS) estimation techniques were used. This was due to potential problems of endogeneity and spherical errors of serial correlation, heteroskedasticity, cross sectional dependence and multicollinearity. The results using the 2SLS IV estimation technique show that stock market capitalisation, GDP per capita, banking credit to private sector, real exchange rate and private investments are key macroeconomic drivers of private equity penetration in the selected Sub-Saharan African countries. Inflation had negative and insignificant effect on private equity penetration in the selected countries. The results using the PCSE and FGLS estimation techniques show that the signs of all the variables remain the same as was the case in the 2SLS IV estimation technique though the magnitudes were different. However, the results of PCSE and FGLS estimation techniques show that banking credit to private sector is significant in the FGLS model while private investments is significant in the PCSE model. GDP per capita, real exchange rate, stock market capitalisation and inflation are significant in both the PCSE and FGLS estimation techniques.

show abstract

Section: Discussion Of Regression Resultssupporting

confidence: 65%

Section: Introductionmentioning

confidence: 99%

Macroeconomic Drivers of Private Equity Penetration in Sub-Saharan African Countries

Nkam¹,

Akume²,

Sama³

2019

IBR

View full text Add to dashboard Cite

show abstract

“…These three variables are dependent variables for the measurement of VC investments in China. We choose the following explanatory variables in the regression models: GDP growth rate (Gompers and Lerner, 1998; Carvell et al , 2013; Onio, 2014; Ning et al , 2015), export-to-GDP ratio (Zhu and Kotz, 2011), the annualized consumer price index (Onio, 2014; Ning et al , 2015), the number of patent applications (Shao and Pan, 2011; Lahr and Mina, 2016) and the M2 to GDP ratio (Gompers and Lerner,1998). GDP growth rate is the annualized growth rate for the inflation-adjusted value of total goods and services produced by residents and non-residents in China in a given quarter.…”

Section: Literature Review and Hypothesis Developmentmentioning

confidence: 99%

“…For example, Bonini and Alkan (2012) document the positive effects of a good sociopolitical and entrepreneurial environment on the development of venture industry around the world. Onio (2014) indicates that macroeconomic factors such as GDP growth, tax rate, inflation, stock market value and interest rate are robust determinants of private equity, a later-state VC, in Asian countries. Ning et al (2015) examine the macroeconomic drivers of VC investments in the USA and find that the venture industry favors good macroeconomic and public market conditions.…”

Section: Introductionmentioning

confidence: 99%

What drives the venture capital investments in China?

Ning¹,

Gu-bo²,

Zi-wu

2019

CMS

View full text Add to dashboard Cite

Purpose This study aims to examine the venture capital (VC) industry in China. It has demonstrated a history of high growth with significant variations over time. The authors have examined the trends and determinants of VC investments in China over a 20-year period from 1995 to 2014. They find that the aggregate amount of VC investments, the total number of venture deals and the average amount of venture investments per deal in China are all significantly impacted by macroeconomic conditions (i.e. GDP, export, money supply), technology innovations and financial market indicators (i.e. initial public offerings (IPOs), interest rate, price-to-earnings ratio, etc.). They also find that the 2007 China A-Share stock market crash and the subsequent global financial crisis have motivated VCists in China to adjust their investment strategies and risk levels by allocating more capital to later-stage investments and securing more deals with later-round financings. However, after the 2008 global financial crisis, the China’s venture industry has recovered faster compared to the US counterpart response. Design/methodology/approach The authors first perform trend analysis of VC investments at an aggregate level, by stages of development, and across industry from 1995 to 2014.To test H1 and H2, the authors use multiple regression models with lagged explanatory variables. To test H3, the authors use univariate tests to compare the measures of VC investments at an aggregate level, stage funds ratios, stage deals ratios and financing series ratios during both a five-year and seven-year time windows around the 2007 A-Share stock market crash and the subsequent financial crisis. Findings The development of the VC industry in China has demonstrated a history of high growth with significant variation over time. The authors find that the aggregate amount of VC investments, the total number of venture deals and the average amount of venture investments per deal in China are all significantly impacted by macroeconomic conditions (i.e. GDP, export, money supply), technology innovations and financial market indicators (i.e. IPOs, interest rate, price-to-earnings ratio, etc.). The authors also find that the 2007 China A-Share stock market crash and the subsequent global financial crisis have motivated VCists in China to adjust their investment strategies and risk by allocating more capital to later-stage investments and securing more deals with later-round financings. However, the China VC industry has recovered faster compared to the USA just after the 2008 global financial crisis. Research limitations/implications There are also limitations in the study. The VC data in China in the earlier 1990s might not be very reliable due to the quality of statistics. Therefore, the trend analysis and discussions mainly focus on the time after 2000. Also, the authors cannot find VC financing sequence data for the analysis. Second, there is no doubt that the policy impact from Chinese transforming economic system and government policies on its VC industry is substantial (Su and Wang, 2013). However, they cannot find an appropriate variable to be included in the empirical models to consider this effect. Further study on this area would provide meaningful information. Third, although the authors have done comparison study between the VC industry in China in this study and the VC industry in the US documented in Ning et al. (2015) and discussed some interesting findings, more in-depth research in this area will be very useful. Practical implications The findings have meaningful implications for VCists and start-up companies seeking equity financings in China. VCists should closely monitor macroeconomic and market conditions to make appropriate adjustments to their risk and investment strategies. Entrepreneurs seeking equity financings for their business could also monitor the identified macroeconomic and market indicators, which can help them with their timing and to negotiate a better equity financing deal. VC financing is more likely to succeed when key macroeconomic and market indicators become favorable. Originality/value This paper contributes to the literature by testing the supply and demand theory on the VC market proposed by Poterba (1989) and Gompers and Lerner (1998) from the macroeconomic perspective using 20 years’ VC data from China. The authors also examine how the 2007 A-Share stock market crash and the subsequent financial crisis affected VCists to adjust their risk levels and investment strategies. It provides useful information for international academia and policymakers to understand the quick rise of China VC industry. The authors also find that the macroeconomic drivers of VC industry are somewhat different under different economic systems.

show abstract

“…PE investors demand the satisfying level of investor protection, entrepreneurial management skills, capital market activity and establishment of supporting institutions such as M&A Boutiques, Banks, Lawyers, Consultants, Accountants, etc. Oino (2014) analyzed the relevance of macroeconomic and environmental determinants of PE investment across nine emerging Asian markets using the EBA approach on data spanning from 2004 to 2013. Confirming the findings of prior studies, he found the corporate tax rate, GDP growth, disclosure and investor protection to be robustly related to PE investment with a threshold of 60 percent.…”

mentioning

confidence: 99%

Determinants of private equity investment across sectors in India

Neerza¹,

Tripathi

2019

J of Advances in Mgmt Research

View full text Add to dashboard Cite

Purpose -The purpose of this paper is to explore country-specific and firm-specific factors responsible for attracting private equity investment across sectors in India. Design/methodology/approach -The analysis involves three macroeconomic variables (rule of law, net FIIs and interest rate) across six sectors. Also, three firm-specific variables (ROE, DTA and EBITDA margin) for 89 companies with private equity across five sectors. OLS, Prais-Winsten, multinomial logit and probit regression models have been used for analysis. Findings -The findings show that while rising foreign investments drive PE activity in energy and engineering and construction is one sector, strong legal structures and rising interest rates are the drivers of PE activity in the healthcare sector. In firm-specific analysis, though the profitability and leverage effect is invisible in the industrials and healthcare sectors, it is quite significant in IT and telecom is one sector and commodities sector. Research limitations/implications -Results are subject to limited data on private equity in different sectors. There is a lack of data for comparison on companies belonging to certain sectors like real estate, infrastructure, etc. A limited literature is available for reference purpose. Research findings may serve as preliminary criteria for private equity investors seeking investment in India. Originality/value -The value of this research is in the identification of most relevant macroeconomic and firm-specific factors for private equity investors seeking investment across sectors in India.

show abstract

The Macroeconomic and Environmental Determinants of Private Equity in Emerging Asia Market: The Application of Extreme Bounds Analysis

Cited by 4 publications

References 19 publications

Macroeconomic Drivers of Private Equity Penetration in Sub-Saharan African Countries

Macroeconomic Drivers of Private Equity Penetration in Sub-Saharan African Countries

What drives the venture capital investments in China?

Determinants of private equity investment across sectors in India

Contact Info

Product

Resources

About