Challenges to Scaling Sustainable Private Equity Markets in Emerging Europe

Abstract

The objective of this paper is to identify the main barriers to sustainable private equity market development in emerging European countries. The cross-country panel data analysis that was used in this paper will focus on the main determinants of the private equity investments over the period 2000-2013. We followed the methodology developed by Gompers and Lerner in order to estimate a panel data model with fixed and random effects. Starting from the existing literature, we analyzed variables that were confirmed by the previous studies and we also introduce new variables, such as the corruption index, uncertainty index, and regulation. The results of our study confirmed the existing hypothesis regarding the barriers to private equity development, such as the unemployment rate, the lack of exit mechanisms due to the low level of market capitalization, and the corruption.Abstract: The objective of this paper is to identify the main barriers to sustainable private equity market development in emerging European countries. The cross-country panel data analysis that was used in this paper will focus on the main determinants of the private equity investments over the period 2000-2013. We followed the methodology developed by Gompers and Lerner in order to estimate a panel data model with fixed and random effects. Starting from the existing literature, we analyzed variables that were confirmed by the previous studies and we also introduce new variables, such as the corruption index, uncertainty index, and regulation. The results of our study confirmed the existing hypothesis regarding the barriers to private equity development, such as the unemployment rate, the lack of exit mechanisms due to the low level of market capitalization, and the corruption.

Drivers of Private Equity Activity across Europe: An East-West Comparison

“…We follow the framework described in Woolridge (2013) and Greene (2003) to estimate a panel data model with xed and random effects, which has also been used by Gompers and Lerner (1998), Precup (2019), Precup (2017), Cherif and Gazdar (2011), and Leachman (2002).…”

“…Still, the topic of what drives the PE activity across the entire Europe is not su ciently researched in the literature, and speci cally, Central and Eastern Europe (CEE) seems overlooked. Most of the research, as noted by Precup (2019), Diaconu (2017), and Bernoth and Colavecchio (2014), is concentrated on Western Europe (WE) and on venture capital (VC), which can be explained by greater investor interest in the developed VC market of WE as compared to CEE. Further, to the best of our knowledge, there is no analysis that would compare the PE fundraising and investment activities between WE and CEE regions.…”

Sustainability in Private Capital Investing: A Systematic Literature Review

“…Coming to the most recent period of 2016−2020, there is a drastic increase in PCSI publications, with all but one theme (ESG issues) being directly addressed, although they are indirectly linked to other themes (Aggarwal & Elembilassery, 2018;Agrawal & Hockerts, 2019;Alakent et al, 2020;Antarciuc et al, 2018;Bazley et al, 2017;Bhatt & Ahmad, 2017;Cetindamar & Ozkazanc-Pan, 2017;Chiapello & Gaëtan, 2017;Cumming et al, 2016;de Lange, 2019;Desmarais et al, 2017;Genoud, 2020;Indahl & Jacobsen, 2019;Jadevicius, 2020;Kölbel et al, 2020;Lu et al, 2020;Mayer & Scheck, 2018;Milam, 2018;Poyser et al, 2020;Prelipcean & Boscoianu, 2020;Precup, 2019;Puaschunder, 2017;Sharma et al, 2018;Siddiqui & Marinova, 2019;Watts & Scales, 2020;Xue et al, 2019;Zaccone & Pedrini, 2020;Zhu & Lu, 2020). We expect the sudden increase in publications, with ten published in 2020 alone, is due to the UN SDGs, the COVID-19 pandemic's influence on the focus on social and public well-being, including calls for renewed energy in the fight against climate change and corporate corruption, which many of these authors have touched upon.…”