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Does the Tenure of Private Equity Investment Improve the Performance of European Firms?

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Author Info

  • Oleg Badunenko
  • Christopher F. Baum
  • Dorothea Schäfer

Abstract

The paper investigates whether the presence and tenure of Private Equity (PE) investment in European companies improves their performance. Previous studies documented the unambiguous merit of a buyout during the 1980s and 1990s for listed firms in the US and UK markets. This study analyzes such influences in both listed and unlisted European firms during 2002-2007. Our analysis suggests that shortterm PE investments have, on average, a detrimental effect on firm performance. The performance of a firm that has PE backing is lower than that of a firm without PE backing in the first year of PE investment. Such an effect disappears if PE investments remain in the firm for an uninterrupted six-year term

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File URL: http://www.diw.de/documents/publikationen/73/diw_01.c.354604.de/dp990.pdf
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Bibliographic Info

Paper provided by DIW Berlin, German Institute for Economic Research in its series Discussion Papers of DIW Berlin with number 990.

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Length: 22 p.
Date of creation: 2010
Date of revision:
Handle: RePEc:diw:diwwpp:dp990

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Keywords: Private equity financing; corporate finance;

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