Private equity’s high degree of leverage in the boom years leading up to the recent bust is a dominant factor in that market’s current precarious state. Valuations have fallen precipitously and are likely to fall farther, with some firms going into default. But many firms will prove robust,...

Tax savings associated with increased levels of debt are often thought to be an important source of returns for private equity funds conducting leveraged buyouts (LBOs). However, as leverage is available to all bidders, the vendors may appropriate any benefits in the form of the takeover...

This paper analyzes whether fund valuations produced by private equity managers are biased predictors of future discounted cash flows (DCF). Our research is based on an extensive set of timed cash flows and reported net asset values (NAVs) that relates to 483 funds spanning 1988-2011. Using an...