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Drivers of Private Equity Activity across Europe: An East-West Comparison

Author

Listed:
  • Evzen Kocenda

    (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague; Institute of Information Theory and Automation of the CAS, Prague; CESifo Munich; IOS Regensburg.)

  • Shivendra Rai

    (Institute of Economic Studies, Charles University, Prague, Czech Republic)

Abstract

We investigate the key macroeconomic and institutional determinants of fundraising and investment activities and compare them across Europe, covering 13 Central and Eastern European (CEE) and 16 Western European (WE) countries. Five macroeconomic variables and nineteen institutional variables are selected. These variables are studied using panel data analysis with fixed effects and random effects models over an eleven-year observation period (2010-2020). Bayesian Model Averaging (BMA) is applied to select the key variables. Our results suggest that macroeconomic variables have no significant impact on fundraising and investment activity in either region. Investment activity is a significant driver of fundraising across Europe. Similarly, fundraising and divestment activity are significant drivers of investments across Europe. Institutional variables, however, affect fundraising and investment activity differently. While investment freedom has a significant effect on funds raised in the WE and CEE countries, government integrity and trade freedom are both significant determinants of investments in both European regions. In addition, the results demonstrate that, in contrast to the WE region, fundraising in the CEE region is not country specific.

Suggested Citation

  • Evzen Kocenda & Shivendra Rai, 2023. "Drivers of Private Equity Activity across Europe: An East-West Comparison," Working Papers IES 2023/14, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised May 2023.
    • Handle: RePEc:fau:wpaper:wp2023_14
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    File URL: https://ies.fsv.cuni.cz/en/veda-vyzkum/working-papers/6761
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    More about this item

    Keywords

    Private equity (PE); Fundraising; Investment; Central and Eastern Europe (CEE); Western Europe (WE); Bayesian Model Averaging (BMA);
    All these keywords.

    JEL classification:

    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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