Market Conditions and the Exit Rate of Private Equity Investments in an Emerging Economy
Autor(a) principal: | |
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Data de Publicação: | 2019 |
Outros Autores: | , , |
Tipo de documento: | Artigo |
Idioma: | eng |
Título da fonte: | BAR - Brazilian Administration Review |
Texto Completo: | http://old.scielo.br/scielo.php?script=sci_arttext&pid=S1807-76922019000200304 |
Resumo: | Abstract Private Equity (PE) funds are active investors. Besides providing capital, they improve the governance, operational performance and innovation of the investee companies. However, potential misalignment between the fund manager and the company owner regarding exit timing is a limitation of the model. PE funds have a finite-life, and thus they have to liquidate investments after holding them for a certain period. They tend to time the market to exploit favorable market conditions and obtain higher selling prices, and consequently, PE funds may divest before accomplishing the value creation plan. In this article, we use the hazard model to investigate the magnitude of the impact of market conditions on the exit rate of PE deals in Brazil, a volatile emerging economy, and if it increases the chances of exiting investments with holding periods shorter than two years. We analyze a sample of 470 PE deals invested between 1994 and 2014, and we investigate four variables related to market conditions: the stock market price-earnings ratio, the number of IPOs, the Brazilian real (the Brazilian currency) appreciation against the US dollar and the Brazilian interest rate. Our results show that favorable market conditions more than double the exit rate and increase the probability of quick flips. |
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Market Conditions and the Exit Rate of Private Equity Investments in an Emerging Economyprivate equitymarket timinghazard modelexitholding periodAbstract Private Equity (PE) funds are active investors. Besides providing capital, they improve the governance, operational performance and innovation of the investee companies. However, potential misalignment between the fund manager and the company owner regarding exit timing is a limitation of the model. PE funds have a finite-life, and thus they have to liquidate investments after holding them for a certain period. They tend to time the market to exploit favorable market conditions and obtain higher selling prices, and consequently, PE funds may divest before accomplishing the value creation plan. In this article, we use the hazard model to investigate the magnitude of the impact of market conditions on the exit rate of PE deals in Brazil, a volatile emerging economy, and if it increases the chances of exiting investments with holding periods shorter than two years. We analyze a sample of 470 PE deals invested between 1994 and 2014, and we investigate four variables related to market conditions: the stock market price-earnings ratio, the number of IPOs, the Brazilian real (the Brazilian currency) appreciation against the US dollar and the Brazilian interest rate. Our results show that favorable market conditions more than double the exit rate and increase the probability of quick flips.ANPAD - Associação Nacional de Pós-Graduação e Pesquisa em Administração2019-01-01info:eu-repo/semantics/articleinfo:eu-repo/semantics/publishedVersiontext/htmlhttp://old.scielo.br/scielo.php?script=sci_arttext&pid=S1807-76922019000200304BAR - Brazilian Administration Review v.16 n.2 2019reponame:BAR - Brazilian Administration Reviewinstname:Associação Nacional de Pós-Graduação e Pesquisa em Administração (ANPAD)instacron:ANPAD10.1590/1807-7692bar2019180070info:eu-repo/semantics/openAccessMinardi,Andréa Maria Accioly FonsecaBortoluzzo,Adriana BruscatoRosatelli,PieroRibeiro,Priscila Fernandeseng2019-08-06T00:00:00Zoai:scielo:S1807-76922019000200304Revistahttp://www.scielo.br/scielo.php?script=sci_serial&pid=1807-7692&lng=pt&nrm=isohttps://old.scielo.br/oai/scielo-oai.php||bar@anpad.org.br1807-76921807-7692opendoar:2019-08-06T00:00BAR - Brazilian Administration Review - Associação Nacional de Pós-Graduação e Pesquisa em Administração (ANPAD)false |
dc.title.none.fl_str_mv |
Market Conditions and the Exit Rate of Private Equity Investments in an Emerging Economy |
title |
Market Conditions and the Exit Rate of Private Equity Investments in an Emerging Economy |
spellingShingle |
Market Conditions and the Exit Rate of Private Equity Investments in an Emerging Economy Minardi,Andréa Maria Accioly Fonseca private equity market timing hazard model exit holding period |
title_short |
Market Conditions and the Exit Rate of Private Equity Investments in an Emerging Economy |
title_full |
Market Conditions and the Exit Rate of Private Equity Investments in an Emerging Economy |
title_fullStr |
Market Conditions and the Exit Rate of Private Equity Investments in an Emerging Economy |
title_full_unstemmed |
Market Conditions and the Exit Rate of Private Equity Investments in an Emerging Economy |
title_sort |
Market Conditions and the Exit Rate of Private Equity Investments in an Emerging Economy |
author |
Minardi,Andréa Maria Accioly Fonseca |
author_facet |
Minardi,Andréa Maria Accioly Fonseca Bortoluzzo,Adriana Bruscato Rosatelli,Piero Ribeiro,Priscila Fernandes |
author_role |
author |
author2 |
Bortoluzzo,Adriana Bruscato Rosatelli,Piero Ribeiro,Priscila Fernandes |
author2_role |
author author author |
dc.contributor.author.fl_str_mv |
Minardi,Andréa Maria Accioly Fonseca Bortoluzzo,Adriana Bruscato Rosatelli,Piero Ribeiro,Priscila Fernandes |
dc.subject.por.fl_str_mv |
private equity market timing hazard model exit holding period |
topic |
private equity market timing hazard model exit holding period |
description |
Abstract Private Equity (PE) funds are active investors. Besides providing capital, they improve the governance, operational performance and innovation of the investee companies. However, potential misalignment between the fund manager and the company owner regarding exit timing is a limitation of the model. PE funds have a finite-life, and thus they have to liquidate investments after holding them for a certain period. They tend to time the market to exploit favorable market conditions and obtain higher selling prices, and consequently, PE funds may divest before accomplishing the value creation plan. In this article, we use the hazard model to investigate the magnitude of the impact of market conditions on the exit rate of PE deals in Brazil, a volatile emerging economy, and if it increases the chances of exiting investments with holding periods shorter than two years. We analyze a sample of 470 PE deals invested between 1994 and 2014, and we investigate four variables related to market conditions: the stock market price-earnings ratio, the number of IPOs, the Brazilian real (the Brazilian currency) appreciation against the US dollar and the Brazilian interest rate. Our results show that favorable market conditions more than double the exit rate and increase the probability of quick flips. |
publishDate |
2019 |
dc.date.none.fl_str_mv |
2019-01-01 |
dc.type.driver.fl_str_mv |
info:eu-repo/semantics/article |
dc.type.status.fl_str_mv |
info:eu-repo/semantics/publishedVersion |
format |
article |
status_str |
publishedVersion |
dc.identifier.uri.fl_str_mv |
http://old.scielo.br/scielo.php?script=sci_arttext&pid=S1807-76922019000200304 |
url |
http://old.scielo.br/scielo.php?script=sci_arttext&pid=S1807-76922019000200304 |
dc.language.iso.fl_str_mv |
eng |
language |
eng |
dc.relation.none.fl_str_mv |
10.1590/1807-7692bar2019180070 |
dc.rights.driver.fl_str_mv |
info:eu-repo/semantics/openAccess |
eu_rights_str_mv |
openAccess |
dc.format.none.fl_str_mv |
text/html |
dc.publisher.none.fl_str_mv |
ANPAD - Associação Nacional de Pós-Graduação e Pesquisa em Administração |
publisher.none.fl_str_mv |
ANPAD - Associação Nacional de Pós-Graduação e Pesquisa em Administração |
dc.source.none.fl_str_mv |
BAR - Brazilian Administration Review v.16 n.2 2019 reponame:BAR - Brazilian Administration Review instname:Associação Nacional de Pós-Graduação e Pesquisa em Administração (ANPAD) instacron:ANPAD |
instname_str |
Associação Nacional de Pós-Graduação e Pesquisa em Administração (ANPAD) |
instacron_str |
ANPAD |
institution |
ANPAD |
reponame_str |
BAR - Brazilian Administration Review |
collection |
BAR - Brazilian Administration Review |
repository.name.fl_str_mv |
BAR - Brazilian Administration Review - Associação Nacional de Pós-Graduação e Pesquisa em Administração (ANPAD) |
repository.mail.fl_str_mv |
||bar@anpad.org.br |
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1754209124164304896 |