The Performance of Private Equity Ownership Companies Listed in Indonesia Stock Exchange

Kristine, Yosia and Sembel, Roy and Malau, Melinda (2023) The Performance of Private Equity Ownership Companies Listed in Indonesia Stock Exchange. In: International CEO (Communication, Economics, Organization) Social Sciences Congress. NCM Publishing House, USA, pp. 183-201. ISBN 978-605-73822-9-0

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Abstract

Private Equity (PE) has grown significantly over the last few decades. PE invests in companies with growth potential to increase their value over time. Several studies show that large PE companies are quite hesitant to invest in Indonesia. Despite the political and regulatory challenges, most companies controlled by families or local conglomerates still need to be more explained about the impact of PE on their business and are more likely unwilling to share ownership with other investors. Therefore, this study examines how PE investment affects companies listed on the Indonesia Stock Exchange. The variables used are liquidity, leverage, profitability, sales growth, stock returns, and company size as control variables. The sample consists of 600 quarterly financial data from 15 PE-backed companies and 15 non-PE-backed companies from 5 years after the IPO or after PE's investment, whichever is the most recent. This study uses quantitative research methods and purposive sampling with significant tests method. Research findings show that PE positively and significantly affects liquidity, profitability, and sales growth. This study supports the theory of Principal Agents and the Efficient Market Hypothesis. For practical implication, investors may view PE investments as an indicator of good portfolio performance, while entrepreneurs may view them as a funding option that improves company performance. Keywords: Liquidity, Leverage, Profitability, Sales Growth, Stock Return

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