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http://ssrn.com/abstract=1207858
 
 

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Does Private Equity Create Wealth? The Effects of Private Equity and Derivatives on Corporate Governance


Ronald W. Masulis


University of New South Wales - Australian School of Business; European Corporate Governance Institute (ECGI); Financial Research Network (FIRN)

Randall S. Thomas


Vanderbilt University - Law School; European Corporate Governance Institute (ECGI)

2009

University of Chicago Law Review, Vol. 76, p. 219, 2009
Vanderbilt Law and Economics Research Paper No. 08-20
ECGI - Law Working Paper No. 113/2008
ECGI - Finance Working Paper No. 253/2009

Abstract:     
Private equity has reaped large rewards in recent years. We claim that one major reason for this success is due to the corporate governance advantages of private equity over the public corporation. We argue that the development of substantial derivative contracts and trading has significantly weakened the governance of public corporations and has created a need for financially sophisticated directors and much closer supervision of management. The private equity model delivers these benefits and allows corporations to be better governed, creating wealth gains for investors.

Number of Pages in PDF File: 42

Keywords: private equity, corporate governance, contracts, trading, public corporations, subprime

JEL Classification: G34, K20, K22

Accepted Paper Series


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Date posted: August 13, 2008 ; Last revised: September 24, 2009

Suggested Citation

Masulis, Ronald W. and Thomas, Randall S., Does Private Equity Create Wealth? The Effects of Private Equity and Derivatives on Corporate Governance (2009). University of Chicago Law Review, Vol. 76, p. 219, 2009; Vanderbilt Law and Economics Research Paper No. 08-20; ECGI - Law Working Paper No. 113/2008; ECGI - Finance Working Paper No. 253/2009. Available at SSRN: http://ssrn.com/abstract=1207858

Contact Information

Ronald W. Masulis (Contact Author)
University of New South Wales - Australian School of Business ( email )
Sydney, NSW 2052
Australia
612-9385-5860 (Phone)
612-9385-6347 (Fax)

European Corporate Governance Institute (ECGI) ( email )
c/o ECARES ULB CP 114
B-1050 Brussels
Belgium
Financial Research Network (FIRN)
C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia
HOME PAGE: http://www.firn.org.au

Randall S. Thomas
Vanderbilt University - Law School ( email )
131 21st Avenue South
Nashville, TN 37203-1181
United States
European Corporate Governance Institute (ECGI)
c/o ECARES ULB CP 114
B-1050 Brussels
Belgium
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