Politically Connected Private Equity and Employment

52 Pages Posted: 5 Jul 2013 Last revised: 3 Aug 2016

Mara Faccio

Purdue University - Krannert School of Management; University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER); European Corporate Governance Institute (ECGI); National University of Singapore (NUS) - Asian Bureau of Finance and Economic Research (ABFER)

Scott H. C. Hsu

University of Arkansas - Department of Finance

Date Written: September 12, 2013

Abstract

We investigate the employment consequences of private equity buyouts. We find that, on average, buyouts by politically connected private equity firms are associated with higher job creation at the establishments operated by their target firms than buyouts by non-connected private equity firms. Consistent with an exchange of favors story, establishments operated by targets of politically connected private equity firms increase employment more during election years and in states with high levels of corruption. We also provide evidence of specific benefits experienced by target firms from their political connections. Our conclusions are corroborated by tests designed to mitigate selection concerns.

Keywords: Private Equity, Political Connections, Employment

JEL Classification: G24, G3, J23

Suggested Citation

Faccio, Mara and Hsu, Scott H. C., Politically Connected Private Equity and Employment (September 12, 2013). Journal of Finance, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2289309 or http://dx.doi.org/10.2139/ssrn.2289309

Mara Faccio

Purdue University - Krannert School of Management ( email )

1310 Krannert Building
West Lafayette, IN 47907-1310
United States

University of Chicago - Booth School of Business ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

European Corporate Governance Institute (ECGI)

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

HOME PAGE: http://www.ecgi.org

National University of Singapore (NUS) - Asian Bureau of Finance and Economic Research (ABFER) ( email )

BIZ 2 Storey 4, 04-05
1 Business Link
Singapore, 117592
Singapore

Scott H. C. Hsu (Contact Author)

University of Arkansas - Department of Finance ( email )

Fayetteville, AR 72701
United States

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