Social capital, syndication, and investment performance: Evidence from PE investing in LBOs

Jay Dahya and Wu, Betty (H.T.)

International Review of Financial Analysis, 2024, vol. 95, issue PA

Abstract: This study examines the influence of social capital on leveraged buyout (LBO) investments. Exploiting proprietary global private equity data at the investment-level for leveraged buyouts, we find that alumni of Harvard's MBA program are more inclined to co-invest and form syndicates in LBO with each another. The phenomenon of Crimson pairing manifests in deals that involve uneven investments in co-investor capital, necessitating trust to alleviate agency costs and enabling investors to diversify their portfolios. The outcome of Crimson pairing is an increase in value and investment returns relative to all other typical LBO syndication partnerships.

Keywords: Social capital; Trust; Private equity; LBO syndication; Performance (search for similar items in EconPapers)
JEL-codes: D83 G20 G30 G34 L14 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:95:y:2024:i:pa:s1057521924002382

DOI: 10.1016/j.irfa.2024.103306

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