Private Equity/Venture Capital
Paper Session
Sunday, Jan. 9, 2022 12:15 PM - 2:15 PM (EST)
- Chair: Margarita Tsoutsoura, Cornell University
Does Private Equity Investment in Healthcare Benefit Patients? Evidence from Nursing Homes
Abstract
The past two decades have seen a rapid increase in Private Equity (PE) investment in healthcare, a sector in which intensive government subsidy and market frictions could lead high-powered for-profit incentives to be misaligned with the social goal of affordable, quality care. This paper studies the effects of PE ownership on patient welfare at nursing homes. With administrative patient-level data, we use a within-facility differences-in-differences design to address non-random targeting of facilities. We use an instrumental variables strategy to control for the selection of patients into nursing homes. Our estimates show that PE ownership increases the short-term mortality of Medicare patients by 10%, implying 20,150 lives lost due to PE ownership over our twelve-year sample period. This is accompanied by declines in other measures of patient well-being, such as lower mobility, while taxpayer spending per patient episode increases by 11%. We observe operational changes that help to explain these effects, including declines in nursing staff and compliance with standards. Finally, we document a systematic shift in operating costs post-acquisition toward non-patient care items such as monitoring fees, interest, and lease payments.Corporate Venture Capital and Firm Scope
Abstract
This paper studies whether and how corporate venture capital (CVC) reshapes the firm scope of CVC corporate parent. Using two sets of firm scope measures, the text-based emerging business measures and Compustat segment measures, I document that CVC investments are strongly associated with the subsequent firm scope changes, including integrating emerging businesses, establishing new divisions, and terminating obsolete divisions. A learning-through-experimentation process helps to explain how CVC spurs the firm scope changes. To sharpen the causality, I explore the idiosyncratic fund inflow shocks of those past-connected independent VCs in each CVC program, as well as the US non-stop airline routes. Overall, this paper explores and discovers a novel channel of firm scope change through corporate venture capital.The Value of Specialization in Private Equity: Evidence from the Hotel Industry
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 appears to be better access to attractively priced acquisition financing. Our results provide novel evidence on the heterogeneity of PE investment strategies and associated performance outcomes.Discussant(s)
Zoe Cullen
,
Harvard University
Richard Thakor
,
University of Minnesota
Merih Sevilir
,
Indiana University
Cesare Fracassi
,
University of Texas-Austin
JEL Classifications
- G1 - Asset Markets and Pricing