Combining Banking with Private Equity Investing

Review of Financial Studies, Vol. 26 (9), 2139-2173, June 2013

47 Pages Posted: 19 Sep 2014 Last revised: 15 Feb 2018

See all articles by Lily H. Fang

Lily H. Fang

INSEAD - Finance

Victoria Ivashina

Harvard University; National Bureau of Economic Research (NBER)

Josh Lerner

Harvard Business School - Finance Unit; Harvard University - Entrepreneurial Management Unit; National Bureau of Economic Research (NBER)

Multiple version iconThere are 2 versions of this paper

Date Written: April 1, 2013

Abstract

Bank-affiliated private equity groups account for 30% of all private equity investments. Their market share is highest during peaks of the private equity market, when the parent banks arrange more debt financing for in-house transactions yet have the lowest exposure to debt. Using financing terms and ex-post performance, we show that overall banks do not make superior equity investments to those of standalone private equity groups. Instead, they appear to expand their private equity engagement to take advantage of the credit market booms while capturing private benefits from cross-selling of other banking services.

Keywords: Private equity, banks, credit cycles

JEL Classification: G20, G21, G24

Suggested Citation

Fang, Lily H. and Ivashina, Victoria and Lerner, Josh, Combining Banking with Private Equity Investing (April 1, 2013). Review of Financial Studies, Vol. 26 (9), 2139-2173, June 2013. Available at SSRN: https://ssrn.com/abstract=2497612

Lily H. Fang (Contact Author)

INSEAD - Finance ( email )

Boulevard de Constance
F-77305 Fontainebleau Cedex
France

Victoria Ivashina

Harvard University ( email )

Harvard Business School
Baker Library 233
Boston, MA 02163
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Josh Lerner

Harvard Business School - Finance Unit ( email )

Boston, MA 02163
United States
617-495-6065 (Phone)
617-496-7357 (Fax)

HOME PAGE: http://www.people.hbs.edu/jlerner/

Harvard University - Entrepreneurial Management Unit

Cambridge, MA 02163
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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