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Private Equity and Industry Performance

Author

Listed:
  • Shai Bernstein

    () (Harvard Business School)

  • Josh Lerner

    () (Harvard Business School, Finance Unit, EM Unit)

  • Morten Sørensen

    (Columbia Business School)

  • Per Strömberg

    (Stockholm School of Economics - Department of Finance)

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.

Suggested Citation

  • Shai Bernstein & Josh Lerner & Morten Sørensen & Per Strömberg, 2010. "Private Equity and Industry Performance," Harvard Business School Working Papers 10-045, Harvard Business School.
  • Handle: RePEc:hbs:wpaper:10-045
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    References listed on IDEAS

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    Cited by:

    1. 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.
    2. Ulf Axelson & Tim Jenkinson & Per Strömberg & Michael S. Weisbach, 2013. "Borrow Cheap, Buy High? The Determinants of Leverage and Pricing in Buyouts," Journal of Finance, American Finance Association, vol. 68(6), pages 2223-2267, December.
    3. Popov, Alexander & Roosenboom, Peter, 2013. "Venture capital and new business creation," Journal of Banking & Finance, Elsevier, vol. 37(12), pages 4695-4710.
    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, vol. 11(2), pages 206-232, May.
    5. Rin, Marco Da & Hellmann, Thomas & Puri, Manju, 2013. "A Survey of Venture Capital Research," Handbook of the Economics of Finance, Elsevier.
    6. Tåg, Joacim, 2010. "The Real Effects of Private Equity Buyouts," Working Paper Series 851, Research Institute of Industrial Economics.
    7. Braun, Reiner & Engel, Nico & Hieber, Peter & Zagst, Rudi, 2011. "The risk appetite of private equity sponsors," Journal of Empirical Finance, Elsevier, vol. 18(5), pages 815-832.
    8. Douglas Cumming & Grant Fleming & Sofia Johan & Mai Takeuchi, 2010. "Legal Protection, Corruption and Private Equity Returns in Asia," Journal of Business Ethics, Springer, vol. 95(2), pages 173-193, September.

    More about this item

    JEL classification:

    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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