Due Diligence and Investee Performance
European Financial Management, Forthcoming
68 Pages Posted: 1 Jun 2016
Date Written: May 30, 2016
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: Suggested Citation