Managerial Incentives and Value Creation: Evidence from Private Equity
We analyze the differences between companies owned by private equity (PE) investors and similar public companies. We document that PE-owned companies use much stronger incentives for their top executives and have substantially higher debt levels. However, we find little evidence that PE-owned firms outperform public firms in profitability or operational efficiency. We also show that the compensation and debt differences between PE-owned companies and public companies disappear over a very short period (one to two years) after the PE-owned firm goes public. Our results raise questions about whether and how PE firms and the incentives they put in place create value.
|Date of creation:||Sep 2008|
|Note:||CF IO LE LS|
|Contact details of provider:|| Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.|
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