On the Real Effects of Private Equity Investment - Evidence from New Business Creation

Alexander Popov () and Peter Roosenboom ()
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Peter Roosenboom: Department of Finance, Rotterdam School of Management (RSM), Erasmus University Rotterdam, Burgemeester Oudlaan 50, NL 3062PA Rotterdam, The Netherlands., http://www.rsm.nl/home/faculty/academic_departments/finance

No 1078, Working Paper Series from European Central Bank

Abstract: Using a comprehensive database of European firms, we study how private equity affects the rate of firm entry. We find that private equity investment benefits new business incorporation, especially in industries with naturally higher entry rates and R&D intensity. A two standard deviation increase in private equity investment explains as much as 5.5% of the variation in entry between high-entry and low-entry industries. We address endogeneity by exploiting data on laws that regulate private equity investments by pension funds. Our results hold when we correct for barriers to entry, general access to credit, protection of intellectual property, and labor regulations. JEL Classification: G24, L26, M13.

Keywords: private equity; venture capital; firm entry. (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-bec, nep-eec, nep-ent, nep-ino, nep-ipr and nep-sbm
Date: 2009-08
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