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Does the Tenure of Private Equity Investment Improve the Performance of European Firms?

Eingestellte Publikationen 3.3, 21 S.

Oleg Badunenko, Christopher F. Baum, Dorothea Schäfer

2010. Updated Version March 2010.

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Abstract

The paper investigates whether the presence and tenure of Private Equity (PE) investment in European companies improves their performance. Previous studies documented the unambiguous merit of a buyout during the 1980s and 1990s for listed firms in the US and UK markets. This study analyzes such influences in both listed and unlisted European firms during 2002-2007. Our analysis suggests that short-term PE investments have, on average, a detrimental effect on firm performance. The performance of a firm that has PE backing is lower than that of a firm without PE backing in the first year of PE investment. Such an effect disappears if PE investments remain in the firm for an uninterrupted six-year term.

Dorothea Schäfer

Research Director Financial Markets in the Communications Department



JEL-Classification: M14;G24;G34
Keywords: Private equity financing, corporate finance
Frei zugängliche Version: (econstor)
http://hdl.handle.net/10419/119492

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