There's no need to be a pioneer in emerging private equity markets

Aurélie Sannajust and Alexander Peter Groh

Journal of Corporate Finance, 2020, vol. 65, issue C

Abstract: There is currently considerable enthusiasm for emerging private equity markets, where investors believe they have access to “untapped deal flow”. Early entry may allow them to capitalize on exceptional growth opportunities; however, the pioneering investors enter immature capital markets and have no local transaction experience. This may outweigh the potential benefits of low deal-flow competition and expected growth. We address this potential drawback by analyzing a unique, hand-collected dataset of emerging private equity market transactions. We refer to 1157 deals in 86 host countries between 1973 and 2009, and find that early transactions underperform later deals. The evidence presented is robust and consistent with the improvement in the deal-making environment over time and the benefits of learning how to conduct emerging market private equity deals. The learning benefits are stronger if investors are located in the same country as the investee firm.

Keywords: Emerging markets; Venture capital; Private equity; Alternative assets (search for similar items in EconPapers)
JEL-codes: G23 G24 O16 P52 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:corfin:v:65:y:2020:i:c:s092911992030225x

DOI: 10.1016/j.jcorpfin.2020.101781

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