The recent growth of private equity markets – and their visibility in the public eye – has been accompanied by rising public concerns about transparency, investor protection and governance. The pressure for regulation of private equity funds is increasing. The issues for policy makers are whether strengthened private equity regulation is warranted and, if so, in what ways.
This paper also discusses related empirical evidence on the effect of regulation on the development of private equity markets. Most notably, the most recent empirical evidence from Europe indicates low capital gains taxation stimulates the supply of entrepreneurial capital, while entrepreneur-friendly bankruptcy laws stimulates the demand for entrepreneurial capital.