Private Equity and Firm Performance
Sunday, Jan. 6, 2019 8:00 AM - 10:00 AM
- Chair: Josh Lerner, Harvard University
Private Equity Buyouts and Workplace Safety
AbstractThis paper presents evidence of a large, persistent decline in establishment-level workplace injury rates after private equity (PE) buyouts of publicly-traded firms but not already-private firms. Cross-sectional evidence further links the public-firm post-buyout decline to alleviation of market pressure to focus on short-term performance. Employment drops more in low-injury risk establishments, and the fall in injury rates does not correlate with reductions in employment post-buyout, suggesting that systematic outsourcing of dangerous jobs or underreporting due to layoff concerns is unlikely to explain the results. Overall, our results suggest a novel dimension on which buyouts improve firms' fundamental operational competencies.
The Deregulation of the Private Equity Markets and the Decline in IPOs
AbstractThe deregulation of securities laws in the 1990s—and in particular the National Securities Markets Improvement Act of 1996—has facilitated the process of raising capital privately and been a key driver of the decline in U.S. IPOs. Privately-held startups are now able to grow to a size historically available only to their public peers. The IPO decline is not a market failure in the process of going public. Rather, it is the result of founders taking advantage of their increased bargaining power and lower cost of being private to realize their preference for control by choosing to remain private.
When Investor Incentives and Consumer Interests Diverge: Private Equity in Higher Education
AbstractThis paper studies the effect of private equity buyouts in the for-profit postsecondary education sector. Employing novel data on 88 private equity deals and 994 schools with private equity ownership, we find that private equity buyouts lead to higher enrollment and profits, but also to lower education inputs, lower graduation rates, higher tuition, higher per-student debt, lower student loan repayment rates, and lower earnings among graduates. Neither selection ability of the private equity firms nor changes to the student body composition seem to explain our results. An important mechanism for the effects we observe is that private-equity owned schools are better able to capture government aid.
- D2 - Production and Organizations
- J3 - Wages, Compensation, and Labor Costs