Politically Connected Private Equity and Employment
Purdue University - Krannert School of Management; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI)
Scott H. C. Hsu
University of Wisconsin - Milwaukee
September 12, 2013
This paper investigates the employment consequences of buyouts by politically connected private equity firms. We find that politically connected private equity firms boost employment at their target firms following a buyout. The increase in employment is both statistically and economically significant. We provide evidence that the results are unlikely to be due to politically connected private equity firms selecting different types of targets than non-connected firms. The results are instead consistent with an “exchange of favors” story. For example, politically connected private equity firms boost employment especially during election years and more so in states with high corruption.
Number of Pages in PDF File: 37
Keywords: Private Equity, Political Connections, Employment
JEL Classification: G24, G3, J23
Date posted: July 5, 2013 ; Last revised: September 13, 2013
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