Cross-border Buyout Performance
49 Pages Posted: 8 Apr 2019 Last revised: 8 Jan 2021
Date Written: July 15, 2020
This paper examines the importance of institutional quality in cross-border buyout performance. Using 2,639 cross-border buyout investments during 1998-2007 in 38 countries, we find that the higher the institutional quality of the country where the portfolio company is located, the higher the probability of a successful exit via IPO or M&A. The larger the institutional distance between the portfolio company country and the private equity (PE) firm country, the lower the exit success while PE firms’ international experience, industrial experience, and reputation help improve exit success. Further, their industrial experience and the launch of the local office mitigate the adverse influence of institutional distance.
Keywords: LBOs, private equity, cross-border, law and finance
JEL Classification: G34
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