Does Ownership Matter in Private Equity? The Sources of Variance in Buyouts’ Performance

Strategic Management Journal (Forthcoming)

41 Pages Posted: 9 Oct 2014

See all articles by Francesco Castellaneta

Francesco Castellaneta

SKEMA Business School, Université Côte d'Azur (GREDEG)

Oliver Gottschalg

HEC Paris - Strategy & Business Policy

Date Written: October 9, 2014

Abstract

We study the impact of ownership on firm performance in an unexplored governance context: private equity (PE) firms and the buyouts in which they invest. We employ a multiple-membership, cross-classified, multilevel model on a unique database of 6,950 buyouts realized by 255 PE firms between 1973 and 2008 in 77 countries. The results document a significant PE firm effect (4.6%), the importance of which grows as time passes. We then study three contingencies that increase the importance of the PE firm effect: (a) value addition vs. selection strategies; (b) developed vs. emerging economies; and (c) economic downturns. Our findings shed new light on the sources of variance in buyouts’ performance.

Keywords: corporate effects, private equity, variance decomposition, multilevel analysis, firm performance

Suggested Citation

Castellaneta, Francesco and Gottschalg, Oliver, Does Ownership Matter in Private Equity? The Sources of Variance in Buyouts’ Performance (October 9, 2014). Strategic Management Journal (Forthcoming), Available at SSRN: https://ssrn.com/abstract=2507665

Francesco Castellaneta (Contact Author)

SKEMA Business School, Université Côte d'Azur (GREDEG) ( email )

France

Oliver Gottschalg

HEC Paris - Strategy & Business Policy ( email )

Jouy-en-Josas Cedex, 78351
France

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