Drivers of Private Equity Investment in CEE and Western European Countries

29 Pages Posted: 13 Jul 2010

See all articles by Kerstin Bernoth

Kerstin Bernoth

German Institute for Economic Research (DIW Berlin)

Roberta Colavecchio

Banque centrale du Luxembourg

Magdolna Sass

Hungarian Academy of Sciences (HAS) - Research Centre for Economic and Regional Studies (HAS)

Date Written: May 1, 2010

Abstract

A strong private equity market is a cornerstone for commercialization and innovation in modern economies. However, substantial differences exist in the relative amounts raised and invested in private equity across European countries. We investigate the macro-determinants of private equity investment in Europe, focusing on the comparison between CEE and Western European countries. Our estimations are based on a data set running from 2001 to 2008 and covers 14 Western European and three CEE countries. Applying robust estimation techniques we identify a 'robust' set of determinants of private equity activity in both regions. We find similarities as well as differences in the driving forces of private equity investments in Western European and CEE countries. Our results suggest that commercial bank lending, equity market capitalization, unit labour costs and corporate tax rates are significant determinants of private equity activity.

Keywords: Private Equity, Extreme Bounds Analysis, Central and Eastern European Countries

JEL Classification: C23, C52, E22, G24

Suggested Citation

Bernoth, Kerstin and Colavecchio, Roberta and Sass, Magdolna, Drivers of Private Equity Investment in CEE and Western European Countries (May 1, 2010). DIW Berlin Discussion Paper No. 1002, Available at SSRN: https://ssrn.com/abstract=1639446 or http://dx.doi.org/10.2139/ssrn.1639446

Kerstin Bernoth (Contact Author)

German Institute for Economic Research (DIW Berlin) ( email )

Mohrenstraße 58
Berlin, 10117
Germany

Roberta Colavecchio

Banque centrale du Luxembourg ( email )

2, boulevard Royal
Luxembourg, L-2983
Luxembourg

Magdolna Sass

Hungarian Academy of Sciences (HAS) - Research Centre for Economic and Regional Studies (HAS) ( email )

7621 Pécs, Papnovelde u. 22
Budapest, H-1112
Hungary

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