The Value of Specialization in Private Equity: Evidence from the Hotel Industry

60 Pages Posted: 16 Dec 2020 Last revised: 11 Nov 2021

See all articles by Christophe Spaenjers

Christophe Spaenjers

HEC Paris - Finance Department

Eva Steiner

Penn State Smeal College of Business

Date Written: November 10, 2021

Abstract

We show that PE sector specialists outperform generalists at every stage of the investment life cycle. Using granular data for thousands of U.S. hotels over the last two decades, we document that specialists exert a greater positive influence on more margins of hotel operations, earn higher net cash flows over the holding period, and achieve larger capital gains upon exit than do their generalist peers and other, non-PE investors backing ex ante equivalent assets. By contrast, PE generalists’ strongest comparative advantage may be better access to attractively priced acquisition financing. Our results provide novel evidence on the heterogeneity of PE investment strategies and associated performance outcomes.

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

JEL Classification: G11, G24, G32, R33

Suggested Citation

Spaenjers, Christophe and Steiner, Eva Maria, The Value of Specialization in Private Equity: Evidence from the Hotel Industry (November 10, 2021). HEC Paris Research Paper No. FIN-2020-1410, Available at SSRN: https://ssrn.com/abstract=3738265 or http://dx.doi.org/10.2139/ssrn.3738265

Christophe Spaenjers (Contact Author)

HEC Paris - Finance Department ( email )

1 rue de la Liberation
Jouy-en-Josas Cedex, 78351
France

Eva Maria Steiner

Penn State Smeal College of Business ( email )

University Park, PA 16802
United States

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