Cross-Border LBOs, Human Capital, and Proximity: An Empirical Analysis using Open Sky Agreements
62 Pages Posted: 26 Apr 2014 Last revised: 17 Sep 2018
Date Written: September 5, 2008
We show that cross-border private equity (PE) investments involving U.S. rather than non-U.S. PE investors are more likely have a successful exit (IPO or acquisition). Exogenous increases in effective proximity following “Open-Sky” agreements between the US and the target firm home country increases the propensity of U.S. PE firms to invest in these firms and increases their successful exit probability. We show that greater value-addition by US PE investors following proximity increases is at least partially due to better monitoring and that an important channel driving this is the more efficient allocation of experienced U.S. PE managers to cross-border deals.s.
Note: An earlier version of this paper was circulated under the title, “Cross-border LBOs, Human Capital, and Proximity: Evidence from a Natural Experiment”.
Keywords: International finance, LBO, private equity, open sky agreement
JEL Classification: G15, G34
Suggested Citation: Suggested Citation