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...

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 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 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...

We show how temporary ownership by private equity firms affects industry structure, competition and welfare. Temporary ownership leads to strong investment incentives because equilibrium resale prices are determined by buyers incentives to block rivals from obtaining assets. These incentives...

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...

We characterize when private equity funds have a competitive advantage over strategic buyers in acquiring a target firm. Private equity funds are more inclined to cut loss-making projects, thereby gaining an information advantage for understanding value creation with the target's remaining...

We study the role and performance of private equity (PE) in corporate asset sales. Corporate sellers obtain significantly positive excess returns in PE deals, gains in wealth significantly greater than for intercorporate asset sales. Based on exit valuations for 98% of PE deals, we find gains in...