Cross-border Buyout Performance

Abstract

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