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Private Equity Ownership and Firm Performance: A Framework for Interpreting the Evidence

Author

Listed:
  • Strömberg, Per
  • Thomann, Christian

Abstract

We review the evidence on the impact of private equity (PE) ownership on firms, stakeholders, and the economy. We organize this literature using a framework that emphasizes the costs and benefits of PE as an ownership form and implies five main predictions: (i) only some firms are natural PE targets; (ii) PE ownership is optimally temporary; (iii) debt is typically a cheaper source of capital than PE equity; (iv) PE activity is strongly cyclical; and (v) the PE model is a second-best response to underlying agency and contracting frictions. We use this framework to interpret existing evidence and to clarify when, and for whom, PE ownership creates value.

Suggested Citation

  • Strömberg, Per & Thomann, Christian, 2026. "Private Equity Ownership and Firm Performance: A Framework for Interpreting the Evidence," CEPR Discussion Papers 21717, Centre for Economic Policy Research.
    • Handle: RePEc:cpr:ceprdp:21717
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    File URL: https://cepr.org/publications/DP21717
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    More about this item

    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
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance

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