Due Diligence and Investee Performance

European Financial Management, Forthcoming

68 Pages Posted: 1 Jun 2016

See all articles by Douglas J. Cumming

Douglas J. Cumming

Florida Atlantic University

Simona Zambelli

University of Florence

Multiple version iconThere are 3 versions of this paper

Date Written: May 30, 2016

Abstract

We estimate the economic value of due diligence (DD) in the context of private equity by investigating the relationship between DD and investee performance, while controlling for endogeneity. With the adoption of a novel dataset, we find evidence highly consistent with the view that a thorough DD is associated with improved investee performance. We also distinguish the role of different types of DD and show that the DD performed by fund managers has a more pronounced impact on performance. Instead, the DD mainly performed by external agents, i.e., consultants, lawyers and accountants, gives rise to puzzling results and imperfect matching.

Keywords: Due Diligence, Governance, Performance, Private Equity

JEL Classification: G23, G24, G28

Suggested Citation

Cumming, Douglas J. and Zambelli, Simona, Due Diligence and Investee Performance (May 30, 2016). European Financial Management, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2786763

Douglas J. Cumming

Florida Atlantic University ( email )

777 Glades Rd
Boca Raton, FL 33431
United States

HOME PAGE: http://sites.google.com/view/douglascumming/bio?authuser=0

Simona Zambelli (Contact Author)

University of Florence ( email )

Department of Economics and Management
Via delle Pandette 9
FIRENZE, FI 50127
Italy

HOME PAGE: http://https://www.unifi.it/p-doc2-0-0-A-3f2c352f362e31.html

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