Does going private add value through operating improvements?

Brian Ayash and Harm Schütt

Journal of Corporate Finance, 2016, vol. 40, issue C, 192-215

Abstract: Previous studies document a large positive effect of private equity ownership on operating performance between 1980 and 1990 while evidence on the more recent buyout wave is mixed. We revisit the evidence on post-LBO performance and offer an additional explanation for the varied and time-inconsistent results found in the literature: the effect of accounting for LBO transactions and its change over time. Using hand-collected financial statements for 183 U.S. public-to-private LBOs, we illustrate how previously used proxies for operating performance suffer from an accounting distortion induced by the buyout transaction. We reproduce the results of previous studies. However, once proxies are modified slightly to account for the LBO process, we find no robust evidence of post-buyout improvements in public-to-private LBOs, regardless of the time period of the study.

Keywords: Leveraged buyouts; Financial analysis; Private equity (search for similar items in EconPapers)
JEL-codes: G11 G12 G31 L11 L22 R10 R11 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:corfin:v:40:y:2016:i:c:p:192-215

DOI: 10.1016/j.jcorpfin.2016.07.015

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