This thesis investigates the impact of Private Equity (PE) investment on Chinese portfolio firms. The sample used in this thesis contains all non-financial PE-backed listed firms in mainland stock markets from 2000 to 2011. Three empirical chapters are included. First, we investigate the factors that motivate firms to receive PE investment in China. We find financing and signaling as motivation for PE investment in China are not accepted. Instead, firms with a largest shareholder or a concentrated ownership have higher motivation in receiving PE investment, which is consistent with the minority shareholder role of most PE investors. Second, we examine how PE investment affects Chinese portfolio firms. From regression model results, we confirm that the inflow of PE investment leads to better post-investment performance in the short run but PE investors' have less incentive in evolving into corporate government because their roles as minority shareholders. PE investment shows no significant impact on profitability in the long run. The evidence suggests that most PE investors are short-term-profit driven and their roles are mostly related to the help with IPO listing. Third, we examine which aspect of PE investment can explain IPO underpricing. We find that PE-backed IPOs tend to set higher offering prices (hence lower underpricing) than non-PE backed IPOs, which provides PE investors with higher exit profits via IPO. We finally attribute the lower underpricing to the speculation behaviour of PE investors in Chinese stock markets. This thesis applies the standard theories to a transition economy such as China, and contributes to the general PE literature by adding in the updated Chinese evidence.