We examine the performance of 2,790 private equity (PE) funds incepted during 1979-2008 using Stochastic Discount Factors (SDFs) implied by the two leading consumption-based asset pricing models (CBAPMs) — external habit and long-run risks — as their assumptions appear consistent with...

This paper investigates whether private equity (PE)-backed acquirers have a “parenting advantage” in the mergers & acquisitions (M&A) market. We employ a sample of 788 PE-backed firms and a carefully matched control group of 6,652 non-PE backed peers, for which we observe the entire...

This paper investigates the compensation and growth dynamics of private equity firms. Using proprietary data, I estimate that about half of their revenue is performance-related and find that current fund performance also has indirect effects on firms’ future revenue. The dynamics of these...

I explain the standard carried interest contract as a mechanism to induce incentive compatible fund leverage while also satisfying LP return objectives. Fee, leverage and target return data from private equity real estate (PERE) funds are used to calibrate the model. Steps in the modeling...

We examine whether earnings myopia among publicly traded companies motivates private equity firms to acquire them. Using a sample of private equity takeovers, we show that multiple measures of myopia increase the likelihood of takeover by private equity buyers. In contrast, private takeovers...

Private equity funds and strategic buyers search for targets, in particular those with valuable growth options and in financial distress. We analyze the role of private equity funds jointly with the effect of debt overhang and the effect of cross-subsidization with a strategic buyer's firm. A...

Private equity backed firms have more leverage, more intense compensation contracts, and higher productivity than comparable non-private equity backed firms. We develop a theory of buyouts in oligopolistic markets that ties these facts to an explicit focus on buying assets with the intent of...

Private equity firms are an important part of the industrial restructuring process. We argue that the key is temporary ownership. Buying to sell induces aggressive restructuring since the equilibrium trade sale price increases both because the profits of the acquiring incumbent increase and the...

Investors increasingly allocate capital outside of public equity markets and through private equity investments. We evaluate capital allocation efficiency in public and private markets by comparing the marginal product of capital in firms that receive equity in each market. Public markets...

Private equity owned firms have more leverage, more intense compensation contracts, and higher productivity than comparable firms. We develop a theory of buyouts in oligopolistic markets that explains these facts. Private equity firms are more aggressive in inducing restructuring compared to...