Systematic Literature Review of Private Equity Determinants: Status, Evidence and Open Issues

Abstract

Global private equity (PE) investments continue to increase at unprecedented levels over the last two decades, as investors are increasingly thriving over the potential of funded firms. The purpose of this study is to provide an understanding of determining factors that guide the flow of private equity investment in target firms. The existing academic research concerning selection determinants of private equity investment is restrictive and unstructured. These determinants are diverse and observe inconclusive results in extant literature. To identify the firm-level determinants of private equity investment, understand the current gaps in the literature and direct the future scope of work, the authors conduct a systematic literature review of empirical private equity investment studies. The results pointed out the open issues in private equity literature focusing on drivers of investment decisions and extracted the most frequently observed selection determinants of private equity investments along with their causal relationship. The review also acknowledges that there exists a coherence among private equity and M&A investment decisions and thus, expands the scope of research by including empirical studies on M&A determinants. The study creates a comprehensive database and identifies shortcomings in the relevant literature addressing private equity.