Does the Tenure of Private Equity Investment Improve the Performance of European Firms?
25 Pages Posted: 4 Jul 2010
Date Written: March 2010
The paper investigates whether the presence and tenure of Private Equity (PE) investment in European companies improves their performance. Previous studies documented the unambiguous merit of a buyout during the 1980s and 1990s for listed firms in the US and UK markets. This study analyzes such influences in both listed and unlisted European firms during 2002-2007. Our analysis suggests that shortterm PE investments have, on average, a detrimental effect on firm performance. The performance of a firm that has PE backing is lower than that of a firm without PE backing in the first year of PE investment. Such an effect disappears if PE investments remain in the firm for an uninterrupted six-year term.
Keywords: Private equity financing, corporate finance
JEL Classification: M14, G24, G34
Suggested Citation: Suggested Citation