Coinvestment and risk taking in private equity funds
- 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.
| Verfasserangaben: | Carsten Bienz, Karin S. Thorburn, Uwe WalzORCiDGND |
|---|---|
| URN: | urn:nbn:de:hebis:30:3-395797 |
| URL: | http://safe-frankfurt.de/fileadmin/user_upload/editor_common/Research/Working_Paper/SAFE_WP_126.pdf |
| Titel des übergeordneten Werkes (Englisch): | SAFE working paper series ; No. 126 |
| Schriftenreihe (Bandnummer): | SAFE working paper (126) |
| Verlag: | SAFE |
| Verlagsort: | Frankfurt am Main |
| Dokumentart: | Arbeitspapier |
| Sprache: | Englisch |
| Jahr der Fertigstellung: | 2016 |
| Jahr der Erstveröffentlichung: | 2016 |
| Veröffentlichende Institution: | Universitätsbibliothek Johann Christian Senckenberg |
| Datum der Freischaltung: | 12.04.2016 |
| Freies Schlagwort / Tag: | Private equity; coinvestment; incentives; leveraged buyouts; risk taking; wealth |
| Ausgabe / Heft: | January 25, 2016 |
| Seitenzahl: | 40 |
| HeBIS-PPN: | 381147029 |
| Institute: | 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) | |
| DDC-Klassifikation: | 3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft |
| Sammlungen: | Universitätspublikationen |
| Lizenz (Deutsch): |  Deutsches Urheberrecht |
