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Does culture affect the performance of private equity buyouts?

Benjamin Hammer (), Heiko Hinrichs and Bernhard Schwetzler
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Benjamin Hammer: HHL Leipzig Graduate School of Management
Heiko Hinrichs: HHL Leipzig Graduate School of Management
Bernhard Schwetzler: HHL Leipzig Graduate School of Management

Journal of Business Economics, 2018, vol. 88, issue 3, 393-469

Abstract: Abstract This paper uses GLOBE’s performance orientation (PO) dimension to investigate the relationship between national culture and private equity (PE) performance. We argue that high PO has negative performance implications as it provides the lowest potential for portfolio firms to benefit from a spillover of the distinct PE performance focus, and vice versa. To test this hypothesis, we analyze operating performance metrics of 946 deals from 26 European countries and exit channels of 5093 global deals from 67 countries. Consistent with the “spillover hypothesis”, we find that higher levels of PO are detrimental to efficiency improvements and increase the probability for unsuccessful exits. These findings hold after addressing endogeneity concerns, confounding and measurement error.

Keywords: Private equity; Leveraged buyouts; Exit channel; Operating performance; Culture (search for similar items in EconPapers)
JEL-codes: G24 G34 (search for similar items in EconPapers)
Date: 2018
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Handle: RePEc:spr:jbecon:v:88:y:2018:i:3:d:10.1007_s11573-017-0886-0