Managerial Incentives and Value Creation: Evidence from Private Equity

No 14331, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We analyze the differences between companies owned by private equity (PE) investors and similar public companies. We document that PE-owned companies use much stronger incentives for their top executives and have substantially higher debt levels. However, we find little evidence that PE-owned firms outperform public firms in profitability or operational efficiency. We also show that the compensation and debt differences between PE-owned companies and public companies disappear over a very short period (one to two years) after the PE-owned firm goes public. Our results raise questions about whether and how PE firms and the incentives they put in place create value.

JEL-codes: G3 J33 L20 M52 (search for similar items in EconPapers)
Date: 2008-09
New Economics Papers: this item is included in nep-bec
Note: CF IO LE LS
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Citations: View citations in EconPapers (19)

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