Politically Connected Private Equity and Employment

52 Pages Posted: 5 Jul 2013 Last revised: 3 Aug 2016

See all articles by Mara Faccio

Mara Faccio

Mitchell E. Daniels, Jr. School of Business, Purdue University; National Bureau of Economic Research (NBER); European Corporate Governance Institute (ECGI)

Scott Hsu

University of Arkansas - Department of Finance

Date Written: September 12, 2013

Abstract

We investigate the employment consequences of private equity buyouts. We find that, on average, buyouts by politically connected private equity firms are associated with higher job creation at the establishments operated by their target firms than buyouts by non-connected private equity firms. Consistent with an exchange of favors story, establishments operated by targets of politically connected private equity firms increase employment more during election years and in states with high levels of corruption. We also provide evidence of specific benefits experienced by target firms from their political connections. Our conclusions are corroborated by tests designed to mitigate selection concerns.

Keywords: Private Equity, Political Connections, Employment

JEL Classification: G24, G3, J23

Suggested Citation

Faccio, Mara and Hsu, Scott, Politically Connected Private Equity and Employment (September 12, 2013). Journal of Finance, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2289309 or http://dx.doi.org/10.2139/ssrn.2289309

Mara Faccio

Mitchell E. Daniels, Jr. School of Business, Purdue University ( email )

403 W. State Street
West Lafayette, IN 47907-1310
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

European Corporate Governance Institute (ECGI)

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

HOME PAGE: http://www.ecgi.org

Scott Hsu (Contact Author)

University of Arkansas - Department of Finance ( email )

Fayetteville, AR 72701
United States

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