PRIVATE EQUITY IN THE GLOBAL ECONOMY: EVIDENCE ON INDUSTRY SPILLOVERS

Using a novel dataset on global private equity investments in 19 industries across 48 countries, I find that following private equity investments employment, profitability, and labor productivity increase for publicly listed companies in the same country and industry. This suggests that positive externalities created by private equity firms are absorbed by other companies within the same industry. These effects are more pronounced in country-industries with higher levels of competition, where it is more likely that the competitive pressure from private equity-backed targets forces industry peers to improve. Furthermore, the results are concentrated in countries with moderate levels of innovative capacities, which are shown to be the best absorbers of productivity spillovers in studies on spillovers from foreign direct investments. I further find that capital expenditures of public firms also grow faster subsequent to private equity investments. On the financial side, I provide evidence that industry stock market returns increase after the industry receives venture capital, while buyout investments lead to higher debt levels within the industry.Doctor of Philosoph

Determinants of International Buyout Investments

Using a comprehensive and proprietary data set on international private equity activity, this paper studies the determinants of buyout investments across 61 countries and 19 industries over 1990-2017. The study finds evidence that macroeconomic conditions, development of stock and credit markets, and the regulatory environment in a country are important drivers of international buyout capital flows. The paper shows that countries with low unemployment, more active stock and credit markets, and better rule of law receive more buyout capital. A difference-in-differences approach is used to explore the regulatory reforms some countries have adopted over the sample period. The findings are that countries receive significantly more buyout capital following investor protection and contract enforcement reforms. The impact of regulatory reform is more pronounced in countries with better corporate governance standards and education. Buyout investment responds to these factors more so than foreign direct investment and gross domestic fixed investment

Determinants of International Buyout Investments

AbstractUsing a proprietary data set on international private equity activity, we study the determinants of buyout investments across 61 countries and 19 industries over the period of 1990 to 2017. We find that countries with cyclically strong economies, more active stock and credit markets, and better rule of law experience more buyout activity. Countries also receive more buyout capital following investor protection and contract enforcement reforms. The set of determinants we identify appear somewhat unique to buyout investments, because other forms of investment such as foreign direct investment, gross capital formation, investments in R&amp;D, and M&amp;A activity do not respond similarly to these factors.</jats:p