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http://ssrn.com/abstract=968465
 
 

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Corporate Governance and Independent Directors: Much Ado About Nothing? The Evidence Behind Private Equity Investment Performance


Stefano Gatti


Bocconi University - Department of Finance

Stefano Caselli


Bocconi University - Department of Finance

February 21, 2007


Abstract:     
Recourse to independent directors by private equity investors is not tied to performance increases. We draw this conclusion from analyzing a unique data set representative of the European context: all deals made by Italian closed-end funds from 1999 to 2003. Our study shows, in fact, that corporate governance does not impact the rate of return on a deal. Performance, instead, is driven by the characteristics of an initiative (exit-way, holding period and shareholding).

Further, we find that independent directors are involved in deals requiring greater skills and know-how. They tend to resign when performance is unsatisfactory. Moreover, these professionals improve deal performance if their commitment with the management company lasts throughout the deal and if there is a continual turnover of these directors.

Number of Pages in PDF File: 57

Keywords: performance puzzle, independent director, corporate governance, closed-end fund, private equity

JEL Classification: G34, G24, G11

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Date posted: March 6, 2007  

Suggested Citation

Gatti, Stefano and Caselli, Stefano, Corporate Governance and Independent Directors: Much Ado About Nothing? The Evidence Behind Private Equity Investment Performance (February 21, 2007). Available at SSRN: http://ssrn.com/abstract=968465 or http://dx.doi.org/10.2139/ssrn.968465

Contact Information

Stefano Gatti
Bocconi University - Department of Finance ( email )
Via Roentgen 1
Milano, MI 20136
Italy
Stefano Caselli (Contact Author)
Bocconi University - Department of Finance ( email )
Via Roentgen 1
Milano, MI 20136
Italy
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