The (Heterogenous) Economic Effects of Private Equity Buyouts: A Comment

40 Pages Posted: 18 Oct 2021

See all articles by Brian Ayash

Brian Ayash

California State Polytechnic University, San Luis Obispo - Finance Area

Mahdi Rastad

Orfalea College of Business, California State Polytechnic University

Date Written: October 17, 2021

Abstract

Davis, Haltiwanger, Handley, Lerner, Lipsius, and Miranda (2021) continue to produce ex- tensions to the Davis, Haltiwanger, Handley, Jarmin, Lerner, and Miranda (2014) collection without addressing the critical research design issues raised in Ayash and Rastad (2017), Ayash and Rastad (2018) and Ayash and Rastad (2019b). Every error in Davis et al. (2014) and Davis, Haltiwanger, Handley, Lerner, Lipsius, and Miranda (2019) is carried over into their manuscript with a new title. First and foremost, the authors misrepresent their sample as specific to lever- aged buyouts; it is not. We clearly illustrates this fact. Policy makers do not have an issue with venture capital and growth equity buyouts giving piles of cash to firms they acquire because of the subsequent investment in R&D, innovation, jobs and physical capital. However, policy makers cannot learn about the subject of interest, controversial leveraged buyouts, when these make up such a small portion of the sample tested in Davis et al. collection (Davis, Haltiwanger, Jarmin, Lerner, and Miranda, 2008 and Davis, Haltiwanger, Jarmin, Lerner, and Miranda, 2011 focus on employment, Davis, Haltiwanger, Jarmin, Lerner, and Miranda, 2009 presented at the World Economic Forum introduces productivity to the analysis, Davis, Haltiwanger, Handley, Jarmin, Lerner, and Miranda, 2013 brings it all together, and the final published version is Davis et al., 2014. Davis et al. (2019) is basically identical to Davis et al. (2021)). Unfortunately, these authors continue to obfuscate our understanding of the (heterogeneous) economic effects of these complex transactions due to the fact that they cannot observe leverage; they treat all buyouts as equivalent to leveraged buyouts. We therefore gladly reiterate our analysis to bring light to these researchers who have been in the dark for more than a decade.

Keywords: leveraged buyouts, employment, private equity, growth equity

JEL Classification: G23, G32, G33, G34, J21, J63

Suggested Citation

Ayash, Brian and Rastad, Mahdi, The (Heterogenous) Economic Effects of Private Equity Buyouts: A Comment (October 17, 2021). Available at SSRN: https://ssrn.com/abstract=3944209 or http://dx.doi.org/10.2139/ssrn.3944209

Brian Ayash (Contact Author)

California State Polytechnic University, San Luis Obispo - Finance Area ( email )

College of Business
San Luis Obispo, CA 93407
United States

Mahdi Rastad

Orfalea College of Business, California State Polytechnic University ( email )

San Luis Obispo, CA 93407
United States

HOME PAGE: http://www.cob.calpoly.edu/faculty/mahdi-rastad/

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