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Combining Banking with Private Equity Investing

Author

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  • Lily Fang
  • Victoria Ivashina
  • Josh Lerner

Abstract

Bank-affiliated private equity groups account for 30% of all private equity investments. Their market share is highest during peaks of the private equity market, when the parent banks arrange more debt financing for in-house transactions yet have the lowest exposure to debt. Using financing terms and ex-post performance, we show that overall banks do not make superior equity investments to those of standalone private equity groups. Instead, they appear to expand their private equity engagement to take advantage of the credit market booms while capturing private benefits from cross-selling of other banking services.

Suggested Citation

  • Lily Fang & Victoria Ivashina & Josh Lerner, 2013. "Combining Banking with Private Equity Investing," NBER Working Papers 19300, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:19300
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Daniele Coin & Valerio Vacca, 2014. "Non-bank finance for firms. The role of private equity funds in north-western Italy," ERSA conference papers ersa14p119, European Regional Science Association.
    2. Arayssi, Mahmoud, 2015. "Captive Funds and Banks' Capital," MPRA Paper 64912, University Library of Munich, Germany.
    3. Daniele Coin & Valerio Vacca, 2016. "Non-bank finance for firms: the role of private equity funds in Italy," Empirical Economics, Springer, vol. 51(1), pages 221-243, August.
    4. repec:eee:jbfina:v:88:y:2018:i:c:p:30-43 is not listed on IDEAS
    5. von Beschwitz, Bastian & Foos, Daniel, 2018. "Banks' equity stakes and lending: Evidence from a tax reform," Discussion Papers 06/2018, Deutsche Bundesbank.
    6. Takahashi, Hidenori, 2015. "Dynamics of bank relationships in entrepreneurial finance," Journal of Corporate Finance, Elsevier, vol. 34(C), pages 23-31.
    7. repec:eee:respol:v:47:y:2018:i:1:p:49-60 is not listed on IDEAS
    8. Bastian von Beschwitz & Daniel Foos, 2016. "Banks' Equity Stakes and Lending : Evidence from a Tax Reform," International Finance Discussion Papers 1183, Board of Governors of the Federal Reserve System (U.S.).

    More about this item

    JEL classification:

    • G0 - Financial Economics - - General
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage

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