Private Equity in Central and Eastern Europe

Venture capital and private equity (VC/PE) funds in a global perspective belong to the largest nonbank medium, as well as long-term sources of capital. The main aim of this dissertation is to identify private equity specifics from a European perspective and assess its historic and current development within the context of the Central and Eastern European (CEE) region. In connection with that main aim, three hypotheses are defined: Hypothesis 1: The impact of the VC/PE investor on the functions of the financed company during the holding period has a positive effect on the performance of that company. Hypothesis 2: The impact of the VC/PE investor on the functions of the financed company during the holding period has a positive effect on internationalizing that company. Hypothesis 3: The increased international growth of the financed company during the holding period has a positive effect on company performance. Although private equity is not an unknown term in the CEE region, its fundamental terminology and use is not comprehensive. As a result, the first chapter defines and explains basic terms. For a better understanding of the private equity industry, its historical development, systemized division and classical models of private equity funds are further displayed. The second chapter introduces the theoretical background for the particular components applied in the empirical research. It describes fields of investor activity in financed companies and its corresponding effect on their performance and internationalization. Private equity is an integral part of financial markets and is thus influenced by related government programs and legislative changes. In this respect, the third chapter sets forth Czech state support, as well as taxation and legislative adjustments regarding private equity. An analysis is laid out in the final two chapters, the fourth analysing private equity in the CEE region (with specifics from a historical and a current perspective) and thoroughly examining fundraising, investment and divestment according to a scale of determinants. The fifth and last chapter concludes the dissertation by factor analysis confirmation and statistical testing of the above mentioned hypothesis. This dissertation's main contribution is in the results derived from a model describing the role of the VC/PE investor with regard to the performance and internationalization of financed companies, including the statistical testing of defined relationships. Further, it analyses outcome specifics in the VC/PE within the CEE region