We apply control rights theory to explain the structure and determinants of financial covenants in private equity backed leveraged buyouts. We analyze 130 German transactions from 2000 to 2008, covering about 40 percent of the LBO market during this period. We consider Germany to be a superior...

Modern corporations use complex debt instruments and pursue acquisitions. In order to analyze the properties of some of these contracts in the event of an acquisition, this paper considers a company that has an incumbent capital structure, comprising one of five practically important structured...

In this paper we challenge the view that corporate bonds are always arm's length debt. We analyze the effect of bond ratings on the stock price return to acquirers in M&A transactions, which tend to have significant effects on creditor wealth. We find acquirers abnormal returns to be higher if...

We use a proprietary dataset to explore (i) the financial covenant structure and (ii) the determinants of their restrictiveness in leveraged buyouts. With respect to (i) we find that the covenant structure is more standardized in sponsored than in non-sponsored loans: the former show less...

This article aims to analyze the evolution of private equity over the last decade in terms of valuation (asset prices), determinants of private equity returns and the role that leverage and corporate governance plays in the success of private equity. The years 2005-2007 were characterized by a...

This article aims to analyse the evolution over the recent years of LBO funds, in terms of valuation (asset prices) and the role that leverage and corporate governance played in its evolution.Leverage is one of the positive factors that is supposed to contribute to the success of private equity,...

In this paper we address the magnitude of debt-related tax shields employing a proprietary data set of 56 German leveraged buyouts (LBOs) completed between 1997 and 2011. In particular we examine the relevance and performance contribution of tax shields under different financing policies, and...

This paper documents that the bond investments of insurance companies transmit shocks from insurance markets to the real economy. Liquidity windfalls from household insurance purchases increase insurers' demand for corporate bonds. Exploiting the fact that insurers persistently invest in a small...

Sell-side analysts play an important role in propagating corporate capital structure choices across firms. Using exogenous characteristics of analyst network peers as well as the “friends-of-friends” approach from the network effects literature to identify peer effects, we find that...

We survey 79 private equity (PE) investors with combined assets under management of more than $750 billion about their practices in firm valuation, capital structure, governance, and value creation. Investors rely primarily on internal rates of return and multiples to evaluate investments. Their...