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The bright and dark side of staging: Investment performance and the varying motivations of private equity firms

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  • Krohmer, Philipp
  • Lauterbach, Rainer
  • Calanog, Victor

Abstract

Previous papers that examined investment decisions by private equity funds are divided on whether staging has a positive or negative effect on returns. We believe these opposing views can be reconciled by studying when staging is used during the life of the investment relationship: We find that staging has a positive effect on investment returns in the beginning of the investment relationship, consistent with the notion that staging helps mitigate information asymmetry. However, staging appears to be negatively associated with returns when used prior to the exit decision. Our unique dataset allows us to measure these intertemporal effects precisely.

Suggested Citation

  • Krohmer, Philipp & Lauterbach, Rainer & Calanog, Victor, 2009. "The bright and dark side of staging: Investment performance and the varying motivations of private equity firms," Journal of Banking & Finance, Elsevier, vol. 33(9), pages 1597-1609, September.
  • Handle: RePEc:eee:jbfina:v:33:y:2009:i:9:p:1597-1609
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Cumming, Douglas & Zambelli, Simona, 2013. "Private equity performance under extreme regulation," Journal of Banking & Finance, Elsevier, vol. 37(5), pages 1508-1523.
    2. repec:pal:jintbs:v:49:y:2018:i:5:d:10.1057_s41267-017-0116-6 is not listed on IDEAS
    3. Bock, Carolin & Schmidt, Maximilian, 2015. "Should I stay, or should I go? – How fund dynamics influence venture capital exit decisions," Review of Financial Economics, Elsevier, vol. 27(C), pages 68-82.
    4. Rin, Marco Da & Hellmann, Thomas & Puri, Manju, 2013. "A Survey of Venture Capital Research," Handbook of the Economics of Finance, Elsevier.
    5. Phalippou, Ludovic, 2010. "Venture capital funds: Flow-performance relationship and performance persistence," Journal of Banking & Finance, Elsevier, vol. 34(3), pages 568-577, March.
    6. repec:eee:jbfina:v:80:y:2017:i:c:p:14-32 is not listed on IDEAS
    7. repec:eee:jbvent:v:32:y:2017:i:5:p:519-535 is not listed on IDEAS
    8. Cumming, Douglas & Zambelli, Simona, 2010. "Illegal buyouts," Journal of Banking & Finance, Elsevier, vol. 34(2), pages 441-456, February.
    9. Humphery-Jenner, Mark & Suchard, Jo-Ann, 2013. "Foreign VCs and venture success: Evidence from China," Journal of Corporate Finance, Elsevier, vol. 21(C), pages 16-35.
    10. Cumming, Douglas & Helge Haß, Lars & Schweizer, Denis, 2013. "Private equity benchmarks and portfolio optimization," Journal of Banking & Finance, Elsevier, vol. 37(9), pages 3515-3528.
    11. Buchner, Axel, 2016. "Dealing with non-normality when estimating abnormal returns and systematic risk of private equity: A closed-form solution," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 45(C), pages 60-78.
    12. Dai, Na, 2011. "Monitoring via staging: Evidence from Private investments in public equity," Journal of Banking & Finance, Elsevier, vol. 35(12), pages 3417-3431.
    13. Tennert, Julius & Lambert, Marie & Burghof, Hans-Peter, 2017. "Moral hazard in VC finance: More expensive than you thought," Hohenheim Discussion Papers in Business, Economics and Social Sciences 02-2017, University of Hohenheim, Faculty of Business, Economics and Social Sciences.
    14. Buchner, Axel & Mohamed, Abdulkadir & Schwienbacher, Armin, 2016. "Does risk explain persistence in private equity performance?," Journal of Corporate Finance, Elsevier, vol. 39(C), pages 18-35.

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