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Managerial Incentives and Value Creation: Evidence from Private Equity

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Author Info
Phillip Leslie
Paul Oyer

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Abstract

We analyze the differences between companies owned by private equity (PE) investors and similar public companies. We document that PE-owned companies use much stronger incentives for their top executives and have substantially higher debt levels. However, we find little evidence that PE-owned firms outperform public firms in profitability or operational efficiency. We also show that the compensation and debt differences between PE-owned companies and public companies disappear over a very short period (one to two years) after the PE-owned firm goes public. Our results raise questions about whether and how PE firms and the incentives they put in place create value.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 14331.

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Date of creation: Sep 2008
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Handle: RePEc:nbr:nberwo:14331

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Find related papers by JEL classification:
G3 - Financial Economics - - Corporate Finance and Governance
J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General
M52 - Business Administration and Business Economics; Marketing; Accounting - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects

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