Due Diligence and Investee Performance

43 Pages Posted: 19 May 2020

See all articles by Douglas J. Cumming

Douglas J. Cumming

Florida Atlantic University

Simona Zambelli

University of Bologna - Department of Management

Multiple version iconThere are 3 versions of this paper

Date Written: March 2017

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

Suggested Citation

Cumming, Douglas J. and Zambelli, Simona, Due Diligence and Investee Performance (March 2017). European Financial Management, Vol. 23, Issue 2, pp. 211-253, 2017, Available at SSRN: https://ssrn.com/abstract=3600259 or http://dx.doi.org/10.1111/eufm.12100

Douglas J. Cumming (Contact Author)

Florida Atlantic University ( email )

777 Glades Rd
Boca Raton, FL 33431
United States

HOME PAGE: http://booksite.elsevier.com/9780124095373/

Simona Zambelli

University of Bologna - Department of Management ( email )

Faculty of Economics - Forli School of Business
Piazzale della Vittoria, 15
FORLI, FC 47100
Italy

HOME PAGE: http://https://www.unibo.it/sitoweb/simona.zambelli/en

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