Abstract
The disposal of the portfolio company is considered an essential event in the cycle of private equity. This study investigates the impact of the announcement disposal of a portfolio company on the managing listed private equity (LPE) firm. The purpose of this study is to contribute to the field of research and provide evidence based insight on how announcements of the disposal of portfolio companies affect the stock market of the managing LPE. This research will assist investors in decision making and assist the firms in utilising exits to grow the stock market of their firms. The study employs a quantitative research methodology and incorporates the event study technique to carry out a case study on LPE Firm 1 and assess its stock price reaction to the announcement of the disposal of portfolio companies. The findings indicate a market reaction to the firm’s stock market as a result of the announcement of disposals of portfolio companies. However, the study did not determine that this reaction is always positive, as either a negative or positive reaction is noted for each disposal, depending on the surrounding circumstances. The research concluded that the announcement of the disposal of portfolio companies impacts the stock market of the managing LPE.
Key words
Private equity, listed private equity, portfolio companies, event study, stock market reaction, efficient market hypothesis