Private Equity and Financial Stability: Evidence from Failed Bank Resolution in the Crisis

Johnston-Ross, Emily; Ma, Song; Puri, Manju

doi:10.3386/w28751

Cited by 7 publications

(2 citation statements)

References 34 publications

(47 reference statements)

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“…These effects are stronger for PE sponsors with more capital available when needed to support portfolio companies. Focusing on failed banks in the financial crisis, Johnston-Ross, Ma & Puri (2021) find that PE firms acquire weaker, underperforming failed banks when other potential acquirers-local banks-are distressed, reducing the overall costs to regulators and stabilizing the financial system. Still, a more negative view of PE sponsors persists, that the high leverage they impose on portfolio companies leads to costly defaults.…”

Section: Increased Presence Of Private Equity and Distressed Debt Inv...mentioning

confidence: 99%

The Changing Face of Chapter 11 Bankruptcy: Insights from Recent Trends and Research

Hotchkiss,

Thorburn,

Wang

2023

Annu. Rev. Financ. Econ.

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Several recent trends have reshaped the nature of bargaining in Chapter 11. These include increasingly complex prebankruptcy capital structures, decreasing time in Chapter 11 due to prepacks and prenegotiated plans, growing use of restructuring support agreements (RSAs) and sales of substantially all assets, an increased number of defaulting private equity–owned firms, and an increase in activity of specialized distressed debt investors. These trends have changed the balance of power in favor of senior secured lenders, who further shape the course of out-of-court negotiations. We examine evidence of the impact of these changes on important stakeholders, including creditors and workers.

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Section: Increased Presence Of Private Equity and Distressed Debt Inv...mentioning

confidence: 99%

The Changing Face of Chapter 11 Bankruptcy: Insights from Recent Trends and Research

Hotchkiss,

Thorburn,

Wang

2023

Annu. Rev. Financ. Econ.

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“…Relatedly, Hotchkiss, Smith & Strömberg (2012) find that private equity-backed firms in default spent less time in financial distress and were more likely to survive as an independent reorganized company. Finally, Johnston-Ross, Ma & Puri (2021) find that, during the 2008 financial crisis, private equity investors helped channel capital to failed banks, filling the gap created by a weak and undercapitalized banking sector.…”

Section: Private Equity Buyouts: Benefits and Limitationsmentioning

confidence: 99%

The Effects of Public and Private Equity Markets on Firm Behavior

Bernstein

2022

Annu. Rev. Financ. Econ.

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In this article, I review the theoretical and empirical literature on the effects of public and private equity markets on firm behavior, emphasizing the consequences that emerge from disclosure requirements, ownership concentration, and degree of firm standardization. While publicly listed firms benefit from a lower cost of capital, enabling increased focus on commercialization and profitability, they are less suited to pursue long-term risky investments. Privately held firms are better equipped to pursue innovative projects but face a higher cost of capital, which limits their growth. Complementarities between public and private equity markets can mitigate their respective limitations. Innovation in private equity markets supplements commercialization efforts of public firms, and demand for innovation by public firms accelerates entrepreneurial activity in private equity markets. I conclude by discussing directions for future research. Expected final online publication date for the Annual Review of Financial Economics, Volume 13 is November 2022. Please see http://www.annualreviews.org/page/journal/pubdates for revised estimates.

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Operating Improvements in Private Equity Buyouts

Cohn,

Song

2024

The Palgrave Encyclopedia of Private Equity

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Private Equity and Financial Stability: Evidence from Failed Bank Resolution in the Crisis

Cited by 7 publications

References 34 publications

The Changing Face of Chapter 11 Bankruptcy: Insights from Recent Trends and Research

The Changing Face of Chapter 11 Bankruptcy: Insights from Recent Trends and Research

The Effects of Public and Private Equity Markets on Firm Behavior

Operating Improvements in Private Equity Buyouts

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