Determinants of International Buyout Investments

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New research by Serdar Aldatmaz, assistant professor of finance, benefits organizations that are seeking to move operations overseas. In an attempt to better understand global capital formation today and in coming years, Aldatmaz, together with Greg W. Brown from the University of North Carolina at Chapel Hill and Asli Demirguc-Kunt from the World Bank, researched buyout investments across 61 countries and 19 industries over the period of 1990 – 2017.

School of Business Faculty Serdar Aldatmaz
Serdar Aldatmaz

“We found evidence that macro-economic conditions, development of stock and credit markets, and the regulatory environment in a country are all important drivers of international buyout capital flows,” says Aldatmaz. The team found evidence that countries receive more buyout investment following reductions in unemployment and expansions in stock market activity as well as following regulatory reforms related to better contract enforcement and investor protection.

Aldatmaz has been interested in studying the implications of private equity for the real economy for many years. He says the changing nature of capital markets in the United States and other major economies in recent years, including a trend toward more global private equity investment, motivated the team to study the factors that determine international private equity investments.

With this research, the team can provide forecasts on which countries may receive more buyout investment in coming years based on their models. “Given what we know about the positive implications of private equity investments on industry operations and growth, our predictions might be useful for business leaders and organizations that are considering expanding operations overseas,” says Aldatmaz.

“Based on our models, we expect countries like China, Argentina, New Zealand, and Austria to receive more buyout investment in coming years, while countries like Poland, Qatar, and Philippines are likely saturated (or even over-allocated) with buyout investment currently.”