Lopez-de-Silanes, Florencio and Phalippou, Ludovic and Gottschalg, Olivier (2010): Giants at the Gate: On the Cross-section of Private Equity Investment Returns.
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We examine the determinants of private equity returns using a newly constructed database of 7,500 investments worldwide over forty years. The median investment IRR (PME) is 21% (1.3), gross of fees. One in ten investments goes bankrupt, whereas one in four has an IRR above 50%. Only one in eight investments is held for less than 2 years, but such investments have the highest returns. The scale of private equity firms is a significant driver of returns: investments held at times of a high number of simultaneous investments underperform substantially. The median IRR is 36% in the lowest scale decile and 16% in the highest. Results survive robustness tests. Diseconomies of scale are linked to firm structure: independent firms, less hierarchical firms, and those with managers of similar professional backgrounds exhibit smaller diseconomies of scale.
|Item Type:||MPRA Paper|
|Original Title:||Giants at the Gate: On the Cross-section of Private Equity Investment Returns|
|Keywords:||Private Equity, investment, LBOs, Buyouts|
|Subjects:||L - Industrial Organization > L2 - Firm Objectives, Organization, and Behavior > L25 - Firm Performance: Size, Diversification, and Scope
G - Financial Economics > G2 - Financial Institutions and Services
L - Industrial Organization > L2 - Firm Objectives, Organization, and Behavior > L22 - Firm Organization and Market Structure
G - Financial Economics > G2 - Financial Institutions and Services > G24 - Investment Banking; Venture Capital; Brokerage; Ratings and Ratings Agencies
|Depositing User:||Florencio Lopez-de-Silanes|
|Date Deposited:||31. Jan 2011 13:55|
|Last Modified:||15. Feb 2013 21:11|
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