Spillovers of PE investments

We investigate a potential primary effect of leveraged buyouts (LBOs) by private equity (PE) on peers in the same industry using data on US public‐to‐private LBO transactions between 1985 and 2016. We use a network‐based instrumental variable approach to account for potential endogeneity concerns. O...

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Bibliographic Details
Published in:European financial management : the journal of the European Financial Management Association 2024-11, Vol.30 (5), p.2717-2742
Main Authors: Truong, Huynh S., Walz, Uwe
Format: Article
Language:English
Subjects:
Competitiveness
Equity
Financial management
Investment
IV approach
LBO spillovers
Leveraged buyouts
peer effects
Peers
Spillover effect
Transactions
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Summary:We investigate a potential primary effect of leveraged buyouts (LBOs) by private equity (PE) on peers in the same industry using data on US public‐to‐private LBO transactions between 1985 and 2016. We use a network‐based instrumental variable approach to account for potential endogeneity concerns. Our findings indicate that the LBOs by PEs matter for peer firms' performance and corporate strategy relative to nonpeer firms. Our study supports a learning factor hypothesis, but we find no evidence to support the conjecture that peers lose due to the increased competitiveness of the LBO target.
ISSN:1354-7798
1468-036X
DOI:10.1111/eufm.12492