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Does culture affect the performance of private equity buyouts?

Author

Listed:
  • Benjamin Hammer

    (HHL Leipzig Graduate School of Management)

  • Heiko Hinrichs

    (HHL Leipzig Graduate School of Management)

  • Bernhard Schwetzler

    (HHL Leipzig Graduate School of Management)

Abstract

This paper uses GLOBE’s performance orientation (PO) dimension to investigate the relationship between national culture and private equity (PE) performance. We argue that high PO has negative performance implications as it provides the lowest potential for portfolio firms to benefit from a spillover of the distinct PE performance focus, and vice versa. To test this hypothesis, we analyze operating performance metrics of 946 deals from 26 European countries and exit channels of 5093 global deals from 67 countries. Consistent with the “spillover hypothesis”, we find that higher levels of PO are detrimental to efficiency improvements and increase the probability for unsuccessful exits. These findings hold after addressing endogeneity concerns, confounding and measurement error.

Suggested Citation

  • Benjamin Hammer & Heiko Hinrichs & Bernhard Schwetzler, 2018. "Does culture affect the performance of private equity buyouts?," Journal of Business Economics, Springer, vol. 88(3), pages 393-469, May.
  • Handle: RePEc:spr:jbecon:v:88:y:2018:i:3:d:10.1007_s11573-017-0886-0
    DOI: 10.1007/s11573-017-0886-0
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    Cited by:

    1. Benjamin Hammer & Nils Janssen & Bernhard Schwetzler, 2021. "Cross-border buyout pricing," Journal of Business Economics, Springer, vol. 91(5), pages 705-731, July.
    2. Maribel Guerrero & José Ernesto Amorós & David Urbano, 2021. "Do employees’ generational cohorts influence corporate venturing? A multilevel analysis," Small Business Economics, Springer, vol. 57(1), pages 47-74, June.

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    More about this item

    Keywords

    Private equity; Leveraged buyouts; Exit channel; Operating performance; Culture;
    All these keywords.

    JEL classification:

    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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