Private equity and bank capital requirements: Evidence from European firms

Marina-Eliza Spaliara, Serafeim Tsoukas and Paul Lavery

Working Papers from Business School - Economics, University of Glasgow

Abstract: Using firm-level data from 16 euro-area countries over 2008-2014, we investigate how the growth and investment of bank-affiliated private equity-backed companies evolve after the European Banking Authority (EBA) increases capital requirements for their parent banks. We find that portfolio companies connected to affected banks reduce their investment, asset growth, and employment growth following the capital exercise. We further show that the effect is stronger for companies likely to face financial constraints. Finally, the findings indicate that the negative effect of the capital exercise is muted when the private equity sponsor is more experienced.

Keywords: Private equity buyouts; bank capital requirements; financial constraints; company performance (search for similar items in EconPapers)
JEL-codes: G32 G34 (search for similar items in EconPapers)
Date: 2021-06
New Economics Papers: this item is included in nep-ban, nep-bec, nep-cfn, nep-eec, nep-fdg and nep-fmk
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Persistent link: https://EconPapers.repec.org/RePEc:gla:glaewp:2021_11

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