Do Private Equity Owners Increase Risk of Financial Distress and Bankruptcy?
Journal
Journal of Corporate Finance
Type
journal article
Date Issued
2012
Author(s)
Abstract (De)
© 2011 Elsevier B.V. In this study, we investigate financial distress risks of European companies around the buyout event in the period between 2000 and 2008. In addition, we analyze whether buyout companies go bankrupt more often than comparable non-buyout companies. Our results suggest that private equity investors select companies which are less financially distressed than comparable non-buyout companies and that the distress risk increases after the buyout. Despite this increase, private equity-backed companies do not suffer from higher bankruptcy rates than comparable non-buyout companies. In fact, when companies are backed by experienced private equity funds, their bankruptcy rates are even lower. These findings indicate that experienced investors are better able to manage distress risks than their inexperienced counterparts.
Language
English
HSG Classification
contribution to scientific community
HSG Profile Area
SOF - System-wide Risk in the Financial System
Refereed
Yes
Volume
18
Start page
138
End page
150
Pages
12
Subject(s)
Division(s)
Eprints ID
259431
File(s)![Thumbnail Image]()
open.access
Name
1-s2.0-S0929119911001210-main.pdf
Size
549.47 KB
Format
Adobe PDF
Checksum (MD5)
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