Debt Investments in Private Firms: Legal Institutions and Investment Performance in 25 Countries

Posted: 18 Jan 2013 Last revised: 28 Jun 2014

See all articles by Douglas J. Cumming

Douglas J. Cumming

Florida Atlantic University

Grant Fleming

Continuity Capital Partners

Date Written: October 23, 2012

Abstract

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

Cumming, Douglas J. and Fleming, Grant Alan, Debt Investments in Private Firms: Legal Institutions and Investment Performance in 25 Countries (October 23, 2012). Journal of Fixed Income, Summer, 2013, 102-123, Available at SSRN: https://ssrn.com/abstract=2202539

Douglas J. Cumming (Contact Author)

Florida Atlantic University ( email )

777 Glades Rd
Boca Raton, FL 33431
United States

HOME PAGE: http://sites.google.com/view/douglascumming/bio?authuser=0

Grant Alan Fleming

Continuity Capital Partners ( email )

GPO Box 314
Canberra, Australian Capital Territory 2601
Australia

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