Scandinavian Working Papers in Economics

Ratio Working Papers,
The Ratio Institute

No 269: A long-term perspective on private equity ownership

Louise Nordström ()
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Louise Nordström: The Ratio institute and Jönköping School of Economics., Postal: The Ratio Institute, P.O. Box 5095, SE-102 42 Stockholm, Sweden, Jönköping International Business School,, P.O. Box 1026, 551 11 Jönköping

Abstract: Private equity companies are targets to a never-ending controversy debate about their contribution to the economy. The existing empirical data provide, on the one hand, strong evidence that private equity activity contribute positively to efficiency of companies, but they are often viewed as short-term investors who utilize firms’ resources. In this paper I find no empirical support for that claim. By a unique dataset that covers all majority buyouts in Sweden by Swedish private equity firms from 1997-2010 I end up following 680 portfolio firms before and after the buyout as well as after the exit and a peer group defined by industry, size, age and financial performance. I do, however, find that the firms actually performs better after they exit from the private equity firm, which might be a result of sustainable long-term investments rather than short-termism.

Keywords: Private equity; exit; financial performance

JEL-codes: F65; G34

21 pages, April 12, 2016

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