References (22)


Footnotes (5)



Bank Affiliation in Private Equity Firms: Distortions in Investment Selection

Yingdi Wang

California State University, Fullerton

August 29, 2015

Private equity firms that are affiliated with banks have become major players in the industry, raising billions of dollars in funds. Yet, the literature and anecdotal evidence imply that leveraged buyouts (LBOs) carried out by these affiliated firms would underperform independent LBOs. This paper studies these deals from the perspective of target performance. I find that bank-affiliated LBOs have no positive effect on the target firms' operating performance. Furthermore, I investigate whether the implied underperformance is due to problems in managing or selecting investments. In doing so, I find that targets of bank-affiliated LBOs and independent LBOs differ systematically in size, profitability, liquidity, and risk. Moreover, targets of bank-affiliated LBOs do not underperform similar targets of independent LBOs. Instead, all firms that have the characteristics of targets of bank-affiliated LBOs show worse operating performance. These findings cannot be attributed to the private equity market cycle or a skill-based explanation. The overall results are consistent with the view that bank affiliation does not benefit the target firms due to distortions that affiliated firms face in selecting investments.

Number of Pages in PDF File: 48

Keywords: private equity, banks, leveraged buyout

JEL Classification: G23, G24, G34,

Open PDF in Browser Download This Paper

Date posted: December 16, 2012 ; Last revised: September 28, 2015

Suggested Citation

Wang, Yingdi, Bank Affiliation in Private Equity Firms: Distortions in Investment Selection (August 29, 2015). Available at SSRN: http://ssrn.com/abstract=2189644 or http://dx.doi.org/10.2139/ssrn.2189644

Contact Information

Yingdi Wang (Contact Author)
California State University, Fullerton ( email )
Fullerton, CA 92831
United States
Feedback to SSRN

Paper statistics
Abstract Views: 489
Downloads: 78
Download Rank: 209,785
References:  22
Footnotes:  5
Paper comments
No comments have been made on this paper

© 2015 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo8 in 0.328 seconds