Due Diligence and Investee Performance

72 Pages Posted: 22 Mar 2013 Last revised: 1 Jan 2016

See all articles by Douglas J. Cumming

Douglas J. Cumming

Florida Atlantic University

Simona Zambelli

University of Bologna - Department of Management

Multiple version iconThere are 3 versions of this paper

Date Written: December 8, 2015

Abstract

Our study provides new evidence on due diligence (DD) and its impact on investee performance. We estimate the economic value of due diligence (DD) in the context of private equity (PE) by investigating the relationship between DD and investee performance, while controlling for endogeneity. With the adoption of a novel and unique dataset, we find evidence highly consistent with the view that a thorough DD is associated with improved future investee performance. We also distinguish the role of different types of DD and show that the DD carried out internally by fund managers has a more pronounced impact on performance. Instead, the DD mainly performed by external agents, such as consultants, lawyers and accountants, gives rise to puzzling results and imperfect matching, highlighting the existence of apparent agency problems.

Keywords: Due Diligence, Governance, Performance, Private Equity

JEL Classification: G23, G24, G28

Suggested Citation

Cumming, Douglas J. and Zambelli, Simona, Due Diligence and Investee Performance (December 8, 2015). Available at SSRN: https://ssrn.com/abstract=2236182 or http://dx.doi.org/10.2139/ssrn.2236182

Douglas J. Cumming

Florida Atlantic University ( email )

777 Glades Rd
Boca Raton, FL 33431
United States

HOME PAGE: http://booksite.elsevier.com/9780124095373/

Simona Zambelli (Contact Author)

University of Bologna - Department of Management ( email )

Faculty of Economics - Forli School of Business
Piazzale della Vittoria, 15
FORLI, FC 47100
Italy

HOME PAGE: http://https://www.unibo.it/sitoweb/simona.zambelli/en

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