Private Equity and Financial Fragility during the Crisis

Shai Bernstein, Josh Lerner and Filippo Mezzanotti

The Review of Financial Studies, 2019, vol. 32, issue 4, 1309-1373

Abstract: Does private equity (PE) contribute to financial fragility during economic crises? The proliferation of poorly structured transactions during booms may increase the vulnerability of the economy to downturns. During the 2008 crisis, PE-backed companies decreased investments less than did their peers and experienced greater equity and debt inflows, higher asset growth, and increased market share. These effects are especially strong among financially constrained companies and those whose PE investors had more resources at the crisis onset. In a survey, PE firms report being active investors during the crisis and spending more time working with their portfolio companies.Received July 19, 2017; editorial decision March 7, 2018 by Editor Wei Jiang.

Date: 2019
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Working Paper: Private Equity and Financial Fragility during the Crisis (2018)
Working Paper: Private Equity and Financial Fragility During the Crisis (2017)
Working Paper: Private Equity and Financial Fragility during the Crisis (2017)
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