On the real effects of private equity investment: evidence from new ...

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CONTENTSAbstract 4Non-technical summary 51 Introduction 72 Data 102.1 EVCA yearbooks 102.2 Amadeus database 122.3 US industry-level entry data 142.4 Sample construction 153 Empirical methodology 174 Results 184.1 Private equity and entry: main results 184.2 Private equity and entry: contemporaneousvs. long-term effect 204.3 Alternative measures of propensity to entry 214.4 Private equity and access to finance 234.5 Endogeneity and selection 254.6 Robustness 285 Conclusion 30References 33Tables 37Appendix 46European Central Bank Working Paper Series 49ECBWorking Paper Series No 1078August 20093
AbstractUsing a comprehensive database of European firms, we study how private equityaffects the rate of firm entry. We find that private equity investment benefits newbusiness incorporation, especially in industries with naturally higher entry rates andR&D intensity. A two standard deviation increase in private equity investment explainsas 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 equityinvestments by pension funds. Our results hold when we correct for barriers to entry,general access to credit, protection of intellectual property, and labor regulations.Keywords: private equity, venture capital, firm entryJEL Classification: G24, L26, M134ECBWorking Paper Series No 1078August 2009
Page 1 and 2: Working Paper SeriesNo 1078 / augus
Page 3: © European Central Bank, 2009Addre
Page 7 and 8: environment leaves the main results
Page 9 and 10: development and restructuring on sm
Page 11 and 12: to industries which are more R&D in
Page 13 and 14: of destination.We …rst recalculat
Page 15 and 16: 2.3 US industry-level entry dataAs
Page 17 and 18: tend to be heavily regulated and/or
Page 19 and 20: speci…c e¤ects. Critically, we a
Page 21 and 22: …rms only (less than 10 employees
Page 23 and 24: higher for industries with higher e
Page 25 and 26: percentage of the adult population
Page 27 and 28: cost of …nancing to venture capit
Page 29 and 30: 4.6 RobustnessWe conduct an extensi
Page 31 and 32: is the same as the gap between priv
Page 33 and 34: This paper is, to our knowledge, th
Page 35 and 36: [12] Cetorelli, N., and P.E. Straha
Page 37 and 38: [35] Petersen, M., and R. Rajan, 19
Page 39 and 40: Table 2Summary statistics on entry,
Page 41 and 42: Table 42-digit NACE rev. 1.1 indust
Page 43 and 44: Table 6Private equity timing and fi
Page 45 and 46: Table 8Private equity and alternati
Page 47 and 48: Appendix 1. Variables: definitions
Page 49 and 50: Share shadow economyShare of the in
Page 51: 1068 “Asset price misalignments a

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