Cross-Border LBOs, Human Capital, and Proximity: Value Addition through Monitoring in Private Equity Investments

Forthcoming, Journal of Financial and Quantitative Analysis

88 Pages Posted: 26 Apr 2014 Last revised: 11 Nov 2019

See all articles by Thomas J. Chemmanur

Thomas J. Chemmanur

Boston College - Carroll School of Management

Tyler Hull

University of Massachusetts Boston

Karthik Krishnan

Northeastern University

Date Written: November 9, 2019

Abstract

We show that cross-border LBO investments involving U.S. rather than non-U.S. private equity (PE) investors are more likely to have a successful exit (IPO or acquisition). Exogenous increases in effective proximity following the signing of “Open-Sky” agreements between the U.S. and target firms’ home countries increases the propensity of U.S. PE firms to invest in these firms and increases value addition by these investors. We show such increases in value addition by U.S. PE investors following proximity increases are at least partially due to better monitoring, facilitated by the more efficient allocation of experienced U.S. PE managers to cross-border deals.

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

Chemmanur, Thomas J. and Hull, Tyler and Krishnan, Karthik, Cross-Border LBOs, Human Capital, and Proximity: Value Addition through Monitoring in Private Equity Investments (November 9, 2019). Forthcoming, Journal of Financial and Quantitative Analysis, Available at SSRN: https://ssrn.com/abstract=2428834 or http://dx.doi.org/10.2139/ssrn.2428834

Thomas J. Chemmanur (Contact Author)

Boston College - Carroll School of Management ( email )

Finance Department, 436 Fulton Hall
Carroll School of Management, Boston College
Chestnut Hill, MA 02467-3808
United States
617-552-3980 (Phone)
617-552-0431 (Fax)

HOME PAGE: http://https://www2.bc.edu/thomas-chemmanur/

Tyler Hull

University of Massachusetts Boston ( email )

100 William T Morrissey Blvd
Boston, MA 02125
United States

Karthik Krishnan

Northeastern University ( email )

360 Huntington Avenue
414C Hayden Hall
Boston, MA 02115
United States
617-373-4707 (Phone)

HOME PAGE: http://www.northeastern.edu/kkrishnan

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