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Minority and majority private equity investments: firm performance and governance

Author

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  • Erich Battistin

    (Queen Mary, University of London
    Istituto per la Ricerca Valutativa sulle Politiche Pubbliche
    Institute for the Study of Labor
    Center for Economic and Policy Research)

  • Paolo Bortoluzzi

    (University of Padua)

  • Fabio Buttignon

    (University of Padua)

  • Marco Vedovato

    (Ca’ Foscari University of Venice)

Abstract

This paper adds to the literature on the determinants of the effects of private equity (PE) investments. Using an original dataset of 191 target firms in Italy, we study the effects on performance and governance of the stakes acquired by the PE investor. We employ a difference-in-differences approach and compare target and control firms sharing similar characteristics and performance in the years preceding the deal. We find that PE investment has a positive effect on profitability, sales, and employment; these effects are larger for minority investments. We argue that this signals effective governance that follows from complementing rather than substituting incumbent managers in minority investments.

Suggested Citation

  • Erich Battistin & Paolo Bortoluzzi & Fabio Buttignon & Marco Vedovato, 2017. "Minority and majority private equity investments: firm performance and governance," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 21(3), pages 659-684, September.
    • Handle: RePEc:kap:jmgtgv:v:21:y:2017:i:3:d:10.1007_s10997-016-9364-2
    DOI: 10.1007/s10997-016-9364-2
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    More about this item

    Keywords

    Private equity; Minority investment; Family firm; Firm performance; Corporate governance;
    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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