A Comparison of Full and Partial Private Equity Exits in the Nordic Region - Does information asymmetry affect the extent of exit?

Abstract: When exiting their investments, PE firms can either make a full or partial exit. The former implies disposing of the whole stake in the investment while the latter means that a part of the stake is retained. This thesis investigates whether the degree of information asymmetry between the selling PE firm and the buyer affects the likelihood of a partial exit. Using a logistic regression model we analyze a sample consisting of 138 transactions taking place in the Nordic region in the period of 2002-2012. We find support for our hypothesis that a higher degree of information asymmetry between the selling PE firm and the buyer increases the likelihood of a partial exit in order to signal the investment's quality. Moreover, we are able to show significant results for several proxies hypothesized to be important factors in increasing, or diminishing, information asymmetry upon exit. However, we observe some differences among the included subsample estimates, indicating that the fit of the model varies between different time-periods, investment development stages, and countries.