The impact of an attractive financial center on private equity fundraising: Evidence from Casablanca Finance City

Abstract

This paper empirically examines the effects of the size and attractiveness of Casablanca Financial City on the fundraising activities of the Moroccan private equity industry. The study uses Partial Least Squares (PLS) regression to analyze data from 2005 to 2021. The PLS regression can be more suitable than ordinary regression for our study since it addresses challenges arising from small sample sizes and multicollinearity. I use the Jackknife cross-validation method to test the robustness and generalizability of the model. The results suggest that the size and the connectivity of the financial center coupled with financial development and a stable macroeconomic environment are key determinants spurring private equity fundraising in Morocco. However, surprisingly, the quality of the political, institutional, and regulatory environment did not have a positive effect on private equity fundraising. The results affirm the importance of a well-established financial center in promoting investment activities, hence driving the private equity market. Private equity funds are crucial in providing capital to risky companies with high growth potential that may not have access to traditional finance such as banks or capital markets. Therefore, the research contributes to understanding how financial centers influence private equity fundraising providing valuable insights for policymakers and stakeholders aiming to foster economic development by enhancing the private equity industry. One of the main limitations of the study is the difficulty in obtaining detailed data for the analysis. Future research could benefit from improved data availability and accessibility which could potentially make the results more accurate and robust.

Keywords: Financial Center, Private Equity, Fundraising, Economic Growth

JEL Classification: G15, G20, G24, F43, E22, E44.

Paper type: Empirical Research