Abstract:In this study we analyze the risks and perils arising from LBO transactions, in order to consider the impact of private equity in this category of transactions. From this perspective, focusing attention on 2,450 deals occurred during the period 2002-2011, our study adds to previous literature that has investigated the post-LBO operating performance and the factors that can determine the success of those deals. In particular, by running a multivariate regression analysis in order to test for different research … Show more
“…The critics against private equity argue that private equity opportunistically attempt to obtain profits in the short-term at the expense of long-term growth potentials of the firms they acquire by either stripping assets or reducing investments, cutting large numbers of jobs, and raising leverages for tax benefits (Capizzi et al 2014). We examined the effects of private equity on investment activity, leverage, and employments for the firms they invest in Korea.…”
Section: B Investment Activity Financial Stability and Employment mentioning
There has been a surge of interest in private equity as an alternative corporate restructuring scheme to complement the current institutional forms such as workouts and court receivership. By empirically examining whether private equity in Korea can improve investee companies, we find that while private equity in Korea did not sacrifice the long-term growth potential of investee firms, it did not improve their profitability (e.g. ROA, ROE, and ROS) or growth (e.g. sales growth) either. Both the negative correlation between business performance and firm age and our empirical results showing that young firms were favored by private equity for investment imply that Korean private equity may perform as growth capital, similar to venture capital rather than as buyouts for corporate restructuring.
“…The critics against private equity argue that private equity opportunistically attempt to obtain profits in the short-term at the expense of long-term growth potentials of the firms they acquire by either stripping assets or reducing investments, cutting large numbers of jobs, and raising leverages for tax benefits (Capizzi et al 2014). We examined the effects of private equity on investment activity, leverage, and employments for the firms they invest in Korea.…”
Section: B Investment Activity Financial Stability and Employment mentioning
There has been a surge of interest in private equity as an alternative corporate restructuring scheme to complement the current institutional forms such as workouts and court receivership. By empirically examining whether private equity in Korea can improve investee companies, we find that while private equity in Korea did not sacrifice the long-term growth potential of investee firms, it did not improve their profitability (e.g. ROA, ROE, and ROS) or growth (e.g. sales growth) either. Both the negative correlation between business performance and firm age and our empirical results showing that young firms were favored by private equity for investment imply that Korean private equity may perform as growth capital, similar to venture capital rather than as buyouts for corporate restructuring.
scite is a Brooklyn-based organization that helps researchers better discover and understand research articles through Smart Citations–citations that display the context of the citation and describe whether the article provides supporting or contrasting evidence. scite is used by students and researchers from around the world and is funded in part by the National Science Foundation and the National Institute on Drug Abuse of the National Institutes of Health.