TY  - UNPD
A1  - Bienz, Carsten
A1  - Thorburn, Karin S.
A1  - Walz, Uwe
T1  - Coinvestment and risk taking in private equity funds
T2  - SAFE working paper series ; No. 126
N2  - Private equity fund managers are typically required to invest their own money alongside the fund. We examine how this coinvestment affects the acquisition strategy of leveraged buyout funds. In a simple model, where the investment and capital structure decisions are made simultaneously, we show that a higher coinvestment induces managers to chose less risky firms and use more leverage. We test these predictions in a unique sample of private equity investments in Norway, where the fund manager's taxable wealth is publicly available. Consistent with the model, portfolio company risk decreases and leverage ratios increase with the coinvestment fraction of the manager's wealth. Moreover, funds requiring a relatively high coinvestment tend to spread its capital over a larger number of portfolio firms, consistent with a more conservative investment policy.
T3  - SAFE working paper - 126 
KW  - Private equity
KW  - leveraged buyouts
KW  - incentives
KW  - coinvestment
KW  - risk taking
KW  - wealth
Y1  - 2016
UR  - http://publikationen.ub.uni-frankfurt.de/frontdoor/index/index/docId/39579
UR  - https://nbn-resolving.org/urn:nbn:de:hebis:30:3-395797
UR  - http://safe-frankfurt.de/fileadmin/user_upload/editor_common/Research/Working_Paper/SAFE_WP_126.pdf
IS  - January 25, 2016
PB  - SAFE
CY  - Frankfurt am Main
ER  -