Does the Tenure of Private Equity Investment Improve the Performance of European Firms?

25 Pages Posted: 4 Jul 2010

See all articles by Oleg Badunenko

Oleg Badunenko

German Institute for Economic Research

Christopher F. Baum

Boston College - Department of Economics

Dorothea Schaefer

German Institute for Economic Research (DIW Berlin); JIBS

Date Written: March 2010

Abstract

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

Badunenko, Oleg and Baum, Christopher (Kit) F. and Schaefer, Dorothea, Does the Tenure of Private Equity Investment Improve the Performance of European Firms? (March 2010). DIW Berlin Discussion Paper No. 990, Available at SSRN: https://ssrn.com/abstract=1633871 or http://dx.doi.org/10.2139/ssrn.1633871

Oleg Badunenko (Contact Author)

German Institute for Economic Research ( email )

Mohrensrt. 58
Belrin, 10117
Germany

HOME PAGE: http://obadunenko.googlepages.com

Christopher (Kit) F. Baum

Boston College - Department of Economics ( email )

140 Commonwealth Avenue
Chestnut Hill, MA 02467
United States
617-552-3673 (Phone)
617-552-2308 (Fax)

Dorothea Schaefer

German Institute for Economic Research (DIW Berlin) ( email )

Mohrenstraße 58
Berlin, 10117
Germany
+49 30 8978 9162 (Phone)
+49 30 8978 9104 (Fax)

JIBS ( email )

Jönköping, 55111
Sweden

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