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Private Equity, Buy-outs, and Insolvency Risk

Mike Wright () and Nick Wilson ()
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Mike Wright: Imperial College Business School
Nick Wilson: Leeds University Business School

No 8, Research Papers from Enterprise Research Centre

Abstract: Private Equity restructuring using debt has been criticised for increasing financial distress and bankruptcy especially following the financial crisis. We build a unique dataset comprising the population of over 9 million company-year observations and 153,000 insolvencies during 1995-2010. We compare the insolvency hazard of the spectrum of buyout types within the corporate population over time and investigate the risk profile of the companies pre-buyout. Controlling for size, age, sector and macro-economic conditions private-equity backed buyouts are no more prone to insolvency than non-buyouts or other types of management buyins. Moreover, leverage is not the characteristic that distinguishes failed buyouts from those surviving.

Keywords: private equity; management buyouts; distress; bankruptcy; hazard models (search for similar items in EconPapers)
JEL-codes: D21 C25 G24 G32 G33 (search for similar items in EconPapers)
Pages: 51 pages
Date: 2013-07-01
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Published in Journal of Business Finance & Accounting, Vol. 40, Issue 7-8, pages 949-990, September/October 2013

Downloads: (external link) ... ight-and-Wilson2.pdf First version, 2013 (application/pdf)

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