Private Equity Performance Under Extreme Regulation

50 Pages Posted: 8 Mar 2011 Last revised: 20 Nov 2014

See all articles by Douglas J. Cumming

Douglas J. Cumming

Florida Atlantic University

Simona Zambelli

University of Florence

Multiple version iconThere are 2 versions of this paper

Date Written: March 30, 2012


This study investigates the impact of excessive regulation on private equity (PE) returns and firm performance. History shows that extreme regulation and prohibition reduce the supply of capital and raise returns (e.g., as with drugs and diamonds). However, for value-added investors such as PE funds, extreme regulation also reduces the quality of capital and fund involvement. The net effect on returns is therefore ambiguous and heretofore not studied. With a new unique dataset, this paper empirically examines the performance of PE investments in Italy when leveraged buyouts are strictly regulated. The data show that extreme regulation reduces not only the supply of capital, but also PE returns and firm performance, as well as the likelihood of an IPO exit.

Keywords: Buyouts, Performance, Regulation, Governance, Law and Finance

JEL Classification: G23, G24, G28, K22, K34

Suggested Citation

Cumming, Douglas J. and Zambelli, Simona, Private Equity Performance Under Extreme Regulation (March 30, 2012). Journal of Banking and Finance, Vol. 37, 2013, Available at SSRN: or

Douglas J. Cumming

Florida Atlantic University ( email )

777 Glades Rd
Boca Raton, FL 33431
United States


Simona Zambelli (Contact Author)

University of Florence ( email )

Department of Economics and Management
Via delle Pandette 9

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