Debt Investments in Private Firms: Legal Institutions and Investment Performance in 25 Countries
Posted: 18 Jan 2013 Last revised: 28 Jun 2014
Date Written: October 23, 2012
We document the types of private debt investments made by fund managers into private firms across 25 countries over 2001-2010. Returns to private debt investments depend on lender (fund manager) characteristics, particularly portfolio size per manager, highlighting the role of time allocation for due diligence and monitoring. Also, investment returns are significantly related to borrower (firm-specific) risk. By contrast, market conditions such as TED spreads and country level legal factors such as creditor rights are insignificantly or, at most, weakly related to returns. Market and legal conditions are nevertheless significantly related to private debt investment volumes and location.
Keywords: Private debt, Contracts, Performance, Law and finance
JEL Classification: G23, G24
Suggested Citation: Suggested Citation