Specialization and Performance in Private Equity: Evidence from the Hotel Industry

72 Pages Posted: 16 Dec 2020 Last revised: 17 Jul 2023

See all articles by Christophe Spaenjers

Christophe Spaenjers

University of Colorado Boulder - Leeds School of Business

Eva Steiner

Penn State Smeal College of Business

Date Written: June 30, 2023

Abstract

Using granular data for thousands of U.S. hotels over the last two decades, we show that sector-specialist PE firms select operationally more challenging assets, have a greater positive impact on operating profitability, and realize higher capital gains upon exit than do generalists in their respective investments. Our results are consistent with specialists pursuing targeted, hands-on value creation strategies. In contrast, generalists focus on asset management approaches that transfer more easily across investment settings, such as market timing and financial engineering. Our results point towards an equilibrium in the PE industry in which smaller specialists compete with the innate advantages of larger generalists by leveraging industry-specific operating expertise in a chosen market niche.

Keywords: private equity, investment performance, firm ownership, real estate

JEL Classification: G11, G24, G32, R33

Suggested Citation

Spaenjers, Christophe and Steiner, Eva, Specialization and Performance in Private Equity: Evidence from the Hotel Industry (June 30, 2023). Available at SSRN: https://ssrn.com/abstract=3738265 or http://dx.doi.org/10.2139/ssrn.3738265

Christophe Spaenjers (Contact Author)

University of Colorado Boulder - Leeds School of Business ( email )

Boulder, CO 80309-0419
United States

HOME PAGE: http://christophespaenjers.com

Eva Steiner

Penn State Smeal College of Business ( email )

University Park, PA 16802
United States

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