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Private Equity and Industry Performance

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  • Shai Bernstein
  • Josh Lerner
  • Morten Sørensen
  • Per Strömberg

Abstract

The growth of the private equity industry has spurred concerns about its potential impact on the economy more generally. This analysis looks across nations and industries to assess the impact of private equity on industry performance. Industries where PE funds have invested in the past five years have grown more quickly in terms of productivity and employment. There are few significant differences between industries with limited and high private equity activity. It is hard to find support for claims that economic activity in industries with private equity backing is more exposed to aggregate shocks. The results using lagged private equity investments suggest that the results are not driven by reverse causality. These patterns are not driven solely by common law nations such as the United Kingdom and United States, but also hold in Continental Europe.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 15632.

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Date of creation: Jan 2010
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Handle: RePEc:nbr:nberwo:15632

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  1. Chevalier, Judith A, 1995. "Capital Structure and Product-Market Competition: Empirical Evidence from the Supermarket Industry," American Economic Review, American Economic Association, American Economic Association, vol. 85(3), pages 415-35, June.
  2. Muscarella, Chris J & Vetsuypens, Michael R, 1990. " Efficiency and Organizational Structure: A Study of Reverse LBOs," Journal of Finance, American Finance Association, American Finance Association, vol. 45(5), pages 1389-1413, December.
  3. John, Kose & Lang, Larry H P & Netter, Jeffry, 1992. " The Voluntary Restructuring of Large Firms in Response to Performance Decline," Journal of Finance, American Finance Association, American Finance Association, vol. 47(3), pages 891-917, July.
  4. Samuel Kortum & Josh Lerner, 2000. "Assessing the Contribution of Venture Capital to Innovation," RAND Journal of Economics, The RAND Corporation, vol. 31(4), pages 674-692, Winter.
  5. Cao, Jerry & Lerner, Josh, 2009. "The performance of reverse leveraged buyouts," Journal of Financial Economics, Elsevier, Elsevier, vol. 91(2), pages 139-157, February.
  6. Ulf Axelson & Tim Jenkinson, 2008. "Leverage and Pricing in Buyouts: An Empirical Analysis," Economics Series Working Papers 2008fe20, University of Oxford, Department of Economics.
  7. Nick Bloom & Raffaella Sadun & John Van Reenen, 2009. "Do Private Equity Owned Firms Have Better Management Practices?," CEP Occasional Papers 24, Centre for Economic Performance, LSE.
  8. Steven J. Davis & John C. Haltiwanger & Kyle Handley & Ron S. Jarmin & Josh Lerner & Javier Miranda, 2013. "Private Equity, Jobs, and Productivity," NBER Working Papers 19458, National Bureau of Economic Research, Inc.
  9. Jensen, Michael C, 1986. "Agency Costs of Free Cash Flow, Corporate Finance, and Takeovers," American Economic Review, American Economic Association, American Economic Association, vol. 76(2), pages 323-29, May.
  10. Kaplan, Steven, 1989. "The effects of management buyouts on operating performance and value," Journal of Financial Economics, Elsevier, Elsevier, vol. 24(2), pages 217-254.
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  12. Gregor Andrade & Steven N. Kaplan, 1997. "How Costly is Financial (not Economic) Distress? Evidence from Highly Leveraged Transactions that Became Distressed," NBER Working Papers 6145, National Bureau of Economic Research, Inc.
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Cited by:
  1. Ulf Axelson & Tim Jenkinson & Per Strömberg & Michael S. Weisbach, 2012. "Borrow cheap, buy high?: the determinants of leverage and pricing in buyouts," LSE Research Online Documents on Economics, London School of Economics and Political Science, LSE Library 43088, London School of Economics and Political Science, LSE Library.
  2. Lopez-de-Silanes, Florencio & Phalippou, Ludovic & Gottschalg, Olivier, 2010. "Giants at the Gate: On the Cross-section of Private Equity Investment Returns," MPRA Paper 28487, University Library of Munich, Germany.
  3. Douglas Cumming & Grant Fleming & Sofia Johan & Mai Takeuchi, 2010. "Legal Protection, Corruption and Private Equity Returns in Asia," Journal of Business Ethics, Springer, Springer, vol. 95(2), pages 173-193, September.
  4. Thorsten Knauer & Friedrich Sommer, 2012. "Interest barrier rules as a response to highly leveraged transactions: Evidence from the 2008 German business tax reform," Review of Accounting and Finance, Emerald Group Publishing, Emerald Group Publishing, vol. 11(2), pages 206-232, May.
  5. repec:dgr:uvatin:2011035 is not listed on IDEAS
  6. TÃ¥g, Joacim, 2010. "The Real Effects of Private Equity Buyouts," Working Paper Series, Research Institute of Industrial Economics 851, Research Institute of Industrial Economics.
  7. Popov, Alexander & Roosenboom, Peter, 2013. "Venture capital and new business creation," Journal of Banking & Finance, Elsevier, Elsevier, vol. 37(12), pages 4695-4710.

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