The Effects of Private Equity and Venture Capital on Sales and Employment Growth in Small and Medium Sized Businesses

64 Pages Posted: 13 Aug 2014

See all articles by John Paglia

John Paglia

Pepperdine University - Graziadio School of Business and Management

Maretno A. Harjoto

Pepperdine University - Pepperdine Graziadio Business School (PGBS)

Date Written: June 5, 2014

Abstract

We study the effects private equity (PE) and venture capital (VC) financing have on small and mid-sized single entity business establishments from 1995-2009. We focus on single entity establishments to cleanly examine the impact of PE and VC financing on establishments’ organic growth. This study reveals that PE and VC financing have positive impacts on single entity business establishments’ net sales and employment growth. The impact of PE financing on establishments’ growth is slower and smaller than VC financing. However, we find that the benefit of PE financing lasts longer than VC financing. We also find that ethnic minority, female, and foreign business owners are less likely to receive PE and VC financing. Finally, we find evidence that although establishments with government contracts are more likely to receive PE and VC financing, those contracts fail to produce marginal post-funding growth and employment benefits.

Keywords: private equity, venture capital, growth, employment, sales

JEL Classification: G24, J23, J15, J16, L25

Suggested Citation

Paglia, John and Harjoto, Maretno Agus, The Effects of Private Equity and Venture Capital on Sales and Employment Growth in Small and Medium Sized Businesses (June 5, 2014). Journal of Banking and Finance, Vol. 47, pp. 177-197, 2014. Available at SSRN: https://ssrn.com/abstract=2479574

John Paglia (Contact Author)

Pepperdine University - Graziadio School of Business and Management ( email )

Malibu, CA
United States

Maretno Agus Harjoto

Pepperdine University - Pepperdine Graziadio Business School (PGBS) ( email )

Drescher Campus Suite 344
24255 Pacific Coast Highway
Malibu, CA 90263
United States
(310) 506-8542 (Phone)
(310) 506-4126 (Fax)

HOME PAGE: http://scholar.google.com/citations?hl=en&user=9-PfQi0AAAAJ

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