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Macroeconomic Drivers of Private Equity Penetration in Sub-Saharan African Countries

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  • Fonkam Mongwa Nkam
  • Akume Daniel Akume
  • Molem Christopher Sama

Abstract

The objective of this study is to investigate in to the drivers of private equity penetration in Cameroon, Nigeria, Ghana, Kenya and South Africa. Secondary data was collected from private equity and venture capital data bases (CapitalIQ, Preqin, Burgiss and Mergermarket), World Bank development indicators, regional private equity and venture capital associations and country specific stock market websites. The Panel Two-Stage Least Squares Instrumental Variables (2SLS IV), Panel Corrected Standard Errors (PCSE) and Feasible Generalised Least Squares (FGLS) estimation techniques were used. This was due to potential problems of endogeneity and spherical errors of serial correlation, heteroskedasticity, cross sectional dependence and multicollinearity. The results using the 2SLS IV estimation technique show that stock market capitalisation, GDP per capita, banking credit to private sector, real exchange rate and private investments are key macroeconomic drivers of private equity penetration in the selected Sub-Saharan African countries. Inflation had negative and insignificant effect on private equity penetration in the selected countries. The results using the PCSE and FGLS estimation techniques show that the signs of all the variables remain the same as was the case in the 2SLS IV estimation technique though the magnitudes were different. However, the results of PCSE and FGLS estimation techniques show that banking credit to private sector is significant in the FGLS model while private investments is significant in the PCSE model. GDP per capita, real exchange rate, stock market capitalisation and inflation are significant in both the PCSE and FGLS estimation techniques.

Suggested Citation

  • Fonkam Mongwa Nkam & Akume Daniel Akume & Molem Christopher Sama, 2020. "Macroeconomic Drivers of Private Equity Penetration in Sub-Saharan African Countries," International Business Research, Canadian Center of Science and Education, vol. 13(1), pages 192-205, January.
  • Handle: RePEc:ibn:ibrjnl:v:13:y:2020:i:1:p:192-205
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    References listed on IDEAS

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    4. Cressy, Robert & Munari, Federico & Malipiero, Alessandro, 2007. "Playing to their strengths? Evidence that specialization in the private equity industry confers competitive advantage," Journal of Corporate Finance, Elsevier, vol. 13(4), pages 647-669, September.
    5. Groh, Alexander Peter & von Liechtenstein, Heinrich & Lieser, Karsten, 2010. "The European Venture Capital and Private Equity country attractiveness indices," Journal of Corporate Finance, Elsevier, vol. 16(2), pages 205-224, April.
    6. Roger Kelly, 2012. "Drivers of private equity investment activity: are buyout and venture investors really so different?," Venture Capital, Taylor & Francis Journals, vol. 14(4), pages 309-330, October.
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    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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