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Non-bank finance for firms. The role of private equity funds in north-western Italy

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  • Daniele Coin
  • Valerio Vacca

Abstract

Using fund-, firm- and bank-level data we investigate the investments of private equity (PE) funds in the north-western regions of Italy. Both the private equity fund managers and the PE investments are heavily concentrated in this most developed area of the country. The average size of the portfolios is small by international standards and their concentration by firm has been growing after the 2008 crisis. The average duration of investments is rather short (about 3.4 years) and just 10 per cent of them target firms which are both young and innovative. PE investments are more significant for north-western firms than for those in the rest of the country, relative to traditional bank credit. We find that being participated by a PE fund increases the amount of credit obtained by the target firm and (weakly) reduces its cost. However, this effect is exclusively related to the entry of the fund in the firm's capital, as it fades away as soon as the fund exits from the capital, thus suggesting a weak signalling role of PE towards banks.

Suggested Citation

  • Daniele Coin & Valerio Vacca, 2014. "Non-bank finance for firms. The role of private equity funds in north-western Italy," ERSA conference papers ersa14p119, European Regional Science Association.
    • Handle: RePEc:wiw:wiwrsa:ersa14p119
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    References listed on IDEAS

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    1. Lily Fang & Victoria Ivashina & Josh Lerner, 2013. "Combining Banking with Private Equity Investing," The Review of Financial Studies, Society for Financial Studies, vol. 26(9), pages 2139-2173.
    2. Thomas Hellmann & Laura Lindsey & Manju Puri, 2008. "Building Relationships Early: Banks in Venture Capital," The Review of Financial Studies, Society for Financial Studies, vol. 21(2), pages 513-541, April.
    3. Popov, Alexander & Roosenboom, Peter, 2009. "Does private equity investment spur innovation? Evidence from Europe," Working Paper Series 1063, European Central Bank.
    4. Allen N. Berger & Klaus Schaeck, 2011. "Small and Medium-Sized Enterprises, Bank Relationship Strength, and the Use of Venture Capital," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 43, pages 461-490, March.
    5. Masako Ueda, 2004. "Banks versus Venture Capital: Project Evaluation, Screening, and Expropriation," Journal of Finance, American Finance Association, vol. 59(2), pages 601-621, April.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    private equity; fund portfolio;

    JEL classification:

    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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