Found 7 article(s) for author 'Private Equity'

Private Equity and Financial Fragility during the Crisis

Private Equity and Financial Fragility during the Crisis. Josh Lerner, 2017, Paper, “Does private equity increase financial fragility during economic crises? To investigate this issue, we examine the financial decisions and performance of private equity-backed companies in the United Kingdom during the 2008 financial crisis. We find that PE-backed companies experienced a smaller decline in investment, relative to a carefully selected control group. PE-backed companies also experienced a larger increase in debt and equity issuances, while overall leverage remained unchanged. The effects are particularly strong for companies that were more likely to be financially constrained and those where private equity sponsors were more likely to have resources to help the portfolio company. The results are consistent with the hypothesis that PE sponsors relax financing constraints during a sudden tightening of credit markets and inconsistent with the hypothesis that private equity increase financial fragility during periods of financial turmoil.Link

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Private Equity and Industry Performance

Private Equity and Industry Performance. Josh Lerner, March 2017, Paper, “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.Link

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Risk Neglect in Equity Markets

Risk Neglect in Equity Markets. Malcolm Baker, Spring 2016, Paper. “The link between measures of risk and return within the equity market has been very weak over the past 47 years: in the United States, returns on high-risk stocks have cumulatively fallen short of the returns on low-risk stocks, during a period when the equity market as a whole experienced high returns relative to Treasury bills. In the spirit of Fischer Black’s 1993 article “Beta and Return,” published in this journal, the author takes seriously the idea that this evidence reflects a risk anomaly—a mispricing of risk for behavioral and institutional reasons—and revisits the associated implications for investing and corporate finance, examining asset allocation, high leverage in financial firms, low leverage in industrial firms, private equity, venture capital, and bank capital regulation along the way. Many of these implications fit nicely with Black’s original conjectures, and the author highlights refinements and additions to the original list.Link

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Corporate Short-Termism – In the Boardroom and in the Courtroom

Corporate Short-Termism – In the Boardroom and in the Courtroom. Mark Roe, March 14, 2014, Paper. “A long-held view in corporate circles has been that furious rapid trading in stock markets has been increasing in recent decades, justifying corporate governance and corporate law measures that would further shield managers and boards from shareholder influence, to further free boards and managers to pursue their view of sensible long-term strategies in their investment and management policies. Here, I evaluate the evidence in favor of that view…” Link verified June 19, 2014

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The Disintermediation of Financial Markets: Direct Investing in Private Equity

The Disintermediation of Financial Markets: Direct Investing in Private Equity. Victoria Ivashina, Josh Lerner, January 13, 2014, Paper. “This is the first large-sample study of direct private equity investments by institutional investors. The analysis uses a proprietary dataset of all such investments by seven large institutional investors over twenty years. Despite the substantial fee discounts, we find little evidence of attractive relative performance by direct investments. In particular, co-investments underperform traditional fund investments…” May require purchase or user account. Link Verified October 11, 2014

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Entrepreneurial Finance in Finland?

Entrepreneurial Finance in Finland? William R. Kerr, March 2013, Case. “This case describes a new venture attempting to bring early-stage entrepreneurial financing to Finland and other Nordic countries. Entrepreneurship is taking off in Finland, an area that historically has had little venture capital or high-growth start-up activity, but a gap remains for seed-stage financing. The founders are evaluating the best way to structure their private equity fund to reflect their own assets and abilities and the needs and resources of the entrepreneurial scene in the Nordics…” May require purchase or user account. Link Verified October 11, 2014

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New Look: Going Private with Private Equity Support

New Look: Going Private with Private Equity Support. Josh Lerner, 2010, Paper, “In July 2003, UK fashion retailer New Look was taken private with the support of Apax Partners/Permira. The management of New Look, originally listed publicly in 1998, wanted to transform the company to improve performance and take advantage of several opportunities they believed the UK and European retail sector offered. These transformations would increase business risk and require substantial investments and patience from investors.Link

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