Italian Stock Market Reaction to Announcements of Private Equity Investments

Abstract

This article aims to test whether an announcement regarding a possible intervention and/or investment of a Private Equity (PE) in a company already listed has a signalling effect that can influence the behavior of investors and whether this potential difference is affected by the characteristics of the financial system of the country where companies are listed.?To treat our research question and to test the hypotheses developed, we carried out an Event Study collecting data on news regarding the interest of PEs for firms listed in the Italian stock exchange and observing their impact on stock returns. In order to understand also the influence of the Italian context, which is a Bank-Oriented financial system, we observed also the effect on stock returns of news related to the interest of PEs for companies listed in countries with a Marked-Oriented financial system.?The analysis leads to the conclusion that the certification role recognized to Private Equity during the listing process persist also for companies already listed in the financial markets, but mainly in Market-Oriented financial systems.