Private Equity Ownership and Firm Performance: A Framework for Interpreting the Evidence

Strömberg, Per and Christian Thomann

No 21717, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: We review the evidence on the impact of private equity (PE) ownership on firms, stakeholders, and the economy. We organize this literature using a framework that emphasizes the costs and benefits of PE as an ownership form and implies five main predictions: (i) only some firms are natural PE targets; (ii) PE ownership is optimally temporary; (iii) debt is typically a cheaper source of capital than PE equity; (iv) PE activity is strongly cyclical; and (v) the PE model is a second-best response to underlying agency and contracting frictions. We use this framework to interpret existing evidence and to clarify when, and for whom, PE ownership creates value.

JEL-codes: G23 G32 G34 L25 (search for similar items in EconPapers)
Date: 2026-07
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