Private Equity and Employees

Abstract:     
Using linked employer-employee data from Sweden, a difference-in-difference approach, and 201 private equity buyouts undertaken between 1998 and 2004, we show that unemployment risk declines and labor income increases for employees in the wake of a private equity buyout. Unemployment risk declines despite lower employment growth for continuing establishments - attributable to hiring freezes rather than to layoffs - and a lack of change in firm level employment growth. A plausible explanation is relaxed financial constraints: the effects are strongest in industries dependent on external finance for growth, for non-divisional buyouts, and for buyouts just prior to 2001.

Number of Pages in PDF File: 29

Keywords: Buyouts, Employment, Financial Constraints, LBO, Private Equity, Restructuring

JEL Classification: G24, G32, G34, J20, L25

working papers series