THE IMPORTANCE OF THE DEPTH OF THE CAPITAL MARKET ON INTERNATIONAL VENTURE CAPITAL AND PRIVATE EQUITY ALLOCATION DECISIONS: THE CASE OF POLAND

Abstract

This paper addresses the issue of international Venture Capital and Private Equity allocation. The study provides a discussion of the key parameters that determine the international allocation process of private equity funds. This article aims to assess the impact of the depth of the stock market in Poland on international venture capital and private equity allocation decisions. The purpose of this paper is also to focus on the investigation of venture capital and private equity investment trends in Poland. The research methods used are based on systematic and comparative analysis of scientific literature, logical analysis and synthesis, and the analysis of statistical data and results of a questionnaire-based survey. The statistical data used in the article has been based on publications of the Polish Private Equity Association and reports of the European Private Equity and Venture Capital Association (EVCA). The information contained in EVCA reports was based on „PEREP Analytics” data. „PEREP Analytics” is a centralised, non-commercial pan-European private equity database. The „PEREP Analytics” statistics platform monitors the development of pri­vate equity and venture capital in 25 European countries. The article reveals that Poland is similar to the other Central and Eastern European countries with respect to the ratio of private equity investment to gross domestic product (GDP), but there is a major difference which ultimately leads to its attractiveness: this is the size, number of initial public offerings (IPO) and capitalization of the Warsaw Stock Exchange. The total number of IPOs (105) which took place in Warsaw represent 40% of all IPOs in Europe in 2012. The total value of IPOs (EUR 731 million) ranked the WSE in fifth position among those exchanges operating in Europe’s most developed capital markets. Research results indicate that in Poland the second most common exit route for PE funds was divestment by public offering - €36.7m in 2011. The results will be useful to fund managers in improving their private equity allocation decisions in Central and Eastern Europe. The study focuses on the most recent period of development of the VC/PE market in Poland. DOI: http://dx.doi.org/10.5755/j01.em.18.2.4225