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Private equity and bank capital requirements: Evidence from European firms

Author

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  • Marina-Eliza Spaliara
  • Serafeim Tsoukas
  • Paul Lavery

Abstract

Using firm-level data from 16 euro-area countries over 2008-2014, we investigate how the growth and investment of bank-affiliated private equity-backed companies evolve after the European Banking Authority (EBA) increases capital requirements for their parent banks. We find that portfolio companies connected to affected banks reduce their investment, asset growth, and employment growth following the capital exercise. We further show that the effect is stronger for companies likely to face financial constraints. Finally, the findings indicate that the negative effect of the capital exercise is muted when the private equity sponsor is more experienced.

Suggested Citation

  • Marina-Eliza Spaliara & Serafeim Tsoukas & Paul Lavery, 2021. "Private equity and bank capital requirements: Evidence from European firms," Working Papers 2021_11, Business School - Economics, University of Glasgow.
    • Handle: RePEc:gla:glaewp:2021_11
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    References listed on IDEAS

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    More about this item

    Keywords

    Private equity buyouts; bank capital requirements; financial constraints; company performance;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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