Private Equity, Ownership, and Regulation
Journal of Private Equity, Vol. 14, No. 1, pp. 17-24, Winter 2010
Posted: 11 Oct 2010 Last revised: 25 Nov 2010
Date Written: October 10, 2010
I show that private equity transactions (i) illustrate market-driven reactions to inefficient equity markets that result from the diffusion of equity ownership in the public firm and (ii) form part of a larger market trend to-wards the market oriented blockholder model – a hybrid ownership structure that offers the benefits of monitoring associated with concentrated ownership along with the benefits of promoting liquid and efficient capital markets associated with diffused ownership. The analysis also explores the regulatory implications of the trend. In particular, I observe that policymakers display lack of awareness of the trend. Consequently, policymakers face the hazard (i) of amplifying embedded distortions within the US securities regulatory framework and (ii) of introducing what I call regulatory systemic risk into the framework.
Keywords: Adaptation, corporate governance, ownership, private equity, regulation, risk
JEL Classification: G18, G32, G34, G38, K22
Suggested Citation: Suggested Citation