Spillovers of PE investments

  • In this paper, we investigate a primary potential impact of leveraged buyout (LBOs) transactions: the effects of LBOs on the peers of the LBO target in the same industry. Using a data sample based on US LBO transactions between 1985 and 2016, we investigate the impact of the peer firms in the aftermath of the transaction, relative to non-peer firms. To account for potential endogeneity concerns, we employ a network-based instrumental variable approach. Based on this analysis, we find support for the proposition that LBOs do indeed matter for peer firms’ performance and corporate strategy relative to non-peer firms. Our study supports a learning factor hypothesis: peers gain by learning from the LBO target to improve their operational performance. Conversely, we find no evidence to support the conjecture that peers lose due to the increased competitiveness of the LBO target firm.

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Author:Huynh Sang Truong, Uwe WalzORCiDGND
Parent Title (English):SAFE working paper ; No. 357
Series (Serial Number):SAFE working paper (357)
Place of publication:Frankfurt am Main
Document Type:Working Paper
Year of Completion:2022
Year of first Publication:2022
Publishing Institution:Universitätsbibliothek Johann Christian Senckenberg
Release Date:2022/09/13
Tag:IV approach; LBO spillovers; peer effects
Issue:September 3, 2022
Page Number:37
We gratefully acknowledge research support from the Leibniz Institute for Financial Research SAFE.
Institutes:Wirtschaftswissenschaften / Wirtschaftswissenschaften
Wissenschaftliche Zentren und koordinierte Programme / House of Finance (HoF)
Wissenschaftliche Zentren und koordinierte Programme / Center for Financial Studies (CFS)
Wissenschaftliche Zentren und koordinierte Programme / Sustainable Architecture for Finance in Europe (SAFE)
Dewey Decimal Classification:3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft
JEL-Classification:D Microeconomics / D4 Market Structure and Pricing / D45 Rationing; Licensing
L Industrial Organization / L4 Antitrust Issues and Policies / L43 Legal Monopolies and Regulation or Deregulation
O Economic Development, Technological Change, and Growth / O3 Technological Change; Research and Development / O33 Technological Change: Choices and Consequences; Diffusion Processes
Licence (German):License LogoDeutsches Urheberrecht