Market Conditions and the Exit Rate of Private Equity Investments in an Emerging Economy
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| Natura: | Artículo científico |
| Lingua: | en |
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Associação Nacional de Pós-Graduação e Pesquisa em Administração
2019
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| _version_ | 1876470259790118912 |
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| author | Andréa Maria Accioly Fonseca Minardi |
| author_facet | Andréa Maria Accioly Fonseca Minardi |
| contents | Market Conditions and the Exit Rate of Private Equity Investments in an Emerging Economy Andréa Maria Accioly Fonseca Minardi Adriana Bruscato Bortoluzzo Piero Rosatelli Priscila Fernandes Ribeiro Administración y Contabilidad exit hazard model market timing Private equity holding period 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. 2019 artículo científico 1807-7692 https://www.redalyc.org/articulo.oa?id=84160330004 https://www.redalyc.org/journal/841/84160330004/ https://www.redalyc.org/journal/841/84160330004/html/ https://www.redalyc.org/journal/841/84160330004/84160330004.epub https://www.redalyc.org/journal/841/84160330004/movil 10.1590/1807-7692bar2019180070 en http://www.redalyc.org/revista.oa?id=841 BAR - Brazilian Administration Review application/pdf Associação Nacional de Pós-Graduação e Pesquisa em Administração BAR - Brazilian Administration Review (Brasil) Num.2 Vol.16 |
| format | Artículo científico |
| id | redalyc_84160330004 |
| institution | Redalyc |
| language | en |
| publishDate | 2019 |
| publisher | Associação Nacional de Pós-Graduação e Pesquisa em Administração |
| spellingShingle | Market Conditions and the Exit Rate of Private Equity Investments in an Emerging Economy Andréa Maria Accioly Fonseca Minardi Administración y Contabilidad exit hazard model market timing Private equity holding period Market Conditions and the Exit Rate of Private Equity Investments in an Emerging Economy Andréa Maria Accioly Fonseca Minardi Adriana Bruscato Bortoluzzo Piero Rosatelli Priscila Fernandes Ribeiro Administración y Contabilidad exit hazard model market timing Private equity holding period 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. 2019 artículo científico 1807-7692 https://www.redalyc.org/articulo.oa?id=84160330004 https://www.redalyc.org/journal/841/84160330004/ https://www.redalyc.org/journal/841/84160330004/html/ https://www.redalyc.org/journal/841/84160330004/84160330004.epub https://www.redalyc.org/journal/841/84160330004/movil 10.1590/1807-7692bar2019180070 en http://www.redalyc.org/revista.oa?id=841 BAR - Brazilian Administration Review application/pdf Associação Nacional de Pós-Graduação e Pesquisa em Administração BAR - Brazilian Administration Review (Brasil) Num.2 Vol.16 |
| title | Market Conditions and the Exit Rate of Private Equity Investments in an Emerging Economy |
| topic | Administración y Contabilidad exit hazard model market timing Private equity holding period |
| url | https://www.redalyc.org/articulo.oa?id=84160330004 https://www.redalyc.org/journal/841/84160330004/ https://www.redalyc.org/journal/841/84160330004/html/ https://www.redalyc.org/journal/841/84160330004/84160330004.epub https://www.redalyc.org/journal/841/84160330004/movil |