Do Private Equity Owned Firms Have Better Management Practices?

Nicholas Bloom, Raffaella Sadun and John van Reenen

CEP Occasional Papers from Centre for Economic Performance, LSE

Abstract: We use an innovative survey tool to collect management practice data from over 4,000 medium sized manufacturing firms across Asia, Europe and the US. These measures of managerial practice are strongly associated with firm-level performance (e.g. productivity, profitability and stock market value). Private Equity owned firms are significantly better managed than government, family and privately owned firms. Although they are also better managed on average than publicly listed firms with dispersed owners, this difference is not statistically significant. Looking at management practices in detail we find that Private Equity-owned firms have strong people management practices (hiring, firing, pay and promotions) but even stronger operations management practices (lean manufacturing, continuous improvement and monitoring). This suggests that Private Equity ownership is associated with broad based operational improvement in management rather than just stronger performance incentives. Finally, looking at changes in management practices over time, it appears that Private Equity targets poorly managed firms and these firms improve their management practices at a faster rate than other ownership types.

Keywords: management; practices; and; private; equity (search for similar items in EconPapers)
JEL-codes: L2 M2 O3 O32 (search for similar items in EconPapers)
Date: 2009-07
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (28)

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Related works:
Journal Article: Do Private Equity Owned Firms Have Better Management Practices? (2015)
Working Paper: Do private equity owned firms have better management practices? (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:cep:cepops:24

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