On the Real Effects of Private Equity Investment: Evidence from New Business Creation

52 Pages Posted: 9 Aug 2009  

Alexander A. Popov

European Central Bank (ECB)

Peter Roosenboom

Rotterdam School of Management, Erasmus University; Erasmus Research Institute of Management (ERIM)

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Date Written: August 6, 2009

Abstract

Using a comprehensive database of European firms, we study how private equity affects the rate of firm entry. We find that private equity investment benefits new business incorporation, especially in industries with naturally higher entry rates and R&D intensity. A two standard deviation increase in private equity investment explains as 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 equity investments 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 entry

JEL Classification: G24, L26, M13

Suggested Citation

Popov, Alexander A. and Roosenboom, Peter, On the Real Effects of Private Equity Investment: Evidence from New Business Creation (August 6, 2009). ECB Working Paper No. 1078. Available at SSRN: https://ssrn.com/abstract=1436894

Alexander A. Popov (Contact Author)

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Peter Roosenboom

Rotterdam School of Management, Erasmus University ( email )

P.O. Box 1738
Room T09-56
3000 DR Rotterdam
Netherlands
+31 10 40 82255 (Phone)

Erasmus Research Institute of Management (ERIM) ( email )

P.O. Box 1738
3000 DR Rotterdam
Netherlands

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