Skill and Luck in Private Equity Performance

Korteweg, Arthur G.; Sørensen, Morten

doi:10.2139/ssrn.2419299

Cited by 25 publications

(41 citation statements)

References 50 publications

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“…Kaplan and Schoar (2005), for example, found correlations of nearly 0.5 between the returns of one fund and the next within a given private equity firm. Among venture capital (VC) funds, they report even higher levels of persistence, with correlations approaching 0.7 (see also, Phalippou and Gottschalg, 2009;Robinson and Sensoy, 2013;Harris et al, 2014;Ewens and Rhodes-Kropf, 2015; Korteweg and Sørensen, 2017). By contrast, persistence has been almost non-existent among asset managers operating in the public equity markets, such as mutual funds and hedge funds (for reviews, see Ferson, 2010;Wermers, 2011).…”

Section: Introductionmentioning

confidence: 99%

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The Persistent Effect of Initial Success: Evidence from Venture Capital

2017

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We use investment-level data to study performance persistence in venture capital (VC). Consistent with prior studies, we find that each additional IPO among a VC firm's first ten investments predicts as much as an 8% higher IPO rate on its subsequent investments, though this effect erodes with time. In exploring its sources, we document several additional facts: successful outcomes stem in large part from investing in the right places at the right times; VC firms do not persist in their ability to choose the right places and times to invest; but early success does lead to investing in later rounds and in larger syndicates. This pattern of results seems most consistent with the idea that initial success improves access to deal flow. That preferential access raises the quality of subsequent investments, perpetuating performance differences in initial investments.

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Section: Introductionmentioning

confidence: 99%

“…Despite their beliefs about the importance of these quality differences, entrepreneurs and other venture capitalists have little on which to base their assessments of VC firm quality (Korteweg and Sørensen, 2017). Even ex post they cannot determine whether another VC firm might have generated more value for a particular venture.…”

Section: Introductionmentioning

confidence: 99%

The Persistent Effect of Initial Success: Evidence from Venture Capital

2017

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“…The empirical literature attributes successfully investing in early‐stage firms to skill, as is evident in the persistence of venture capital returns (e.g., Kaplan and Schoar (), Hochberg, Ljungqvist, and Vissing‐Jorgensen (), Harris et al. (), Korteweg and Sorensen ()). The selection behavior of successful investors is therefore likely to be correlated with future successful outcomes.…”

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confidence: 99%

Attracting Early‐Stage Investors: Evidence from a Randomized Field Experiment

Bernstein¹,

Korteweg²,

Laws

2017

The Journal of Finance

287

142

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This paper uses a randomized field experiment to identify which start-up characteristics are most important to investors in early-stage firms. The experiment randomizes investors' information sets of fund-raising start-ups. The average investor responds strongly to information about the founding team, but not to firm traction or existing lead investors. We provide evidence that the team is not merely a signal of quality, and that investing based on team information is a rational strategy. Together, our results indicate that information about human assets is causally important for the funding of early-stage firms and hence for entrepreneurial success.

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“…Yonnedi (2010) states that Initial Public Offering (IPO) can improve the quality of Good Corporate Governance (GCG) but the implementation should still involve political decision of the House of Representative (DPR,) as long as time lack problem of political decision can be solved and IPO of SOEs hark back to the spirit of the Constitution of 1945, so that SOE privatization isn't always controversial and considered selling state assets to foreign parties. Korteweg and Sorensen (2017) also states that regarding the implementation of GCG in SOE management, SOE privatization can be performed through the capital market. Buchner et al (2016) states that if the method taken in SOE privatization isn't followed by GCG enforcement, it's not optimally successful.…”

Section: Introductionmentioning

confidence: 99%

Privatization and Firm Performance: a Study of Indonesia’s State-owned Enterprises

Soejono¹,

Heriyanto²

2018

JDM

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This study aimed to examine the differences in the company’s performance before and after privatization. This study also examined the differences in performance before and after privatization on specific sub-samples of the data which is based on privatization method. Government policy of carrying out the privatization toward SOEs is still pro and contra. Various Privatization methods offer its weaknesses and strengths. There are different opinions on the best method for SOE privatization in Indonesia. The population is all companies which execute the privatization method. Secondary data were used namely financial statement which was taken from the Indonesia Stock Exchange, and the company’s website. Data were analyzed using normality test data. In addition, the paired t-test by using normally distributed data assumption was used to test the hypothesis. The results showed that Direct method privatization positive and significant changes in measuring Total Asset Turnover. Performance conducted Privatization through the capital markets showed different results. Test on the capital market method of data showed a similar effect with an analysis on the entire data (without separating the privatization method used) that occur significant performance degradation, especially in measuring Total Asset Turnover, Debt Ratio and Return On Equity. Conducted Management/ Employee Buy-Out (MBO) privatization implied a substantial reduction in measuring Debt Ratio and Return on Equity Performance.

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Skill and Luck in Private Equity Performance

Cited by 25 publications

References 50 publications

The Persistent Effect of Initial Success: Evidence from Venture Capital

The Persistent Effect of Initial Success: Evidence from Venture Capital

Attracting Early‐Stage Investors: Evidence from a Randomized Field Experiment

Privatization and Firm Performance: a Study of Indonesia’s State-owned Enterprises

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