Private Equity, Investment and Financial Constraints – Firm-Level Evidence for France and the United Kingdom

Arbeitspapier

The welfare effects of private equity transactions are debated controversially. We analyze the impact of expansion financing and buyouts by private equity investors on investment of portfolio firms in the UK and France - two countries with different financial systems. Unobserved heterogeneity and the endogeneity of private equity transactions financed by venture capital companies are addressed using dynamic panel data techniques. In both countries we find that portfolio firms display higher investment levels and a lower dependence on internal funds after expansion financing. Buyouts financed by venture capital companies are neither associated with a decrease in investment spending nor with an increase in the dependence on internal finance. In contrary, private equity based buyouts in the UK outperform non-private equity backed British firms in terms of both indicators. Contrasting the notion of several policy makers,we cannot detect that private equity based buyout financing yields higher financial constraints on average.

Object Details

• ISBN: 978-3-86788-141-8
• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Ruhr Economic Papers ; No. 126

Classification and Topics

• Classification: Wirtschaft ; Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill ; Pension Funds; Non-bank Financial Institutions; Financial Instruments; Institutional Investors
• Subject: Investment ; financial constraints ; private equity ; Private Equity ; Übernahme ; Unternehmensentwicklung ; Investition ; Verschuldungsrestriktion ; Vergleich ; Finanzsektor ; Großbritannien ; Frankreich

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Engel, Dirk ; Stiebale, Joel
• Event: Veröffentlichung
• (who): Rheinisch-Westfälisches Institut für Wirtschaftsforschung (RWI)
• (where): Essen
• (when): 2009

Further information

• Handle: http://hdl.handle.net/10419/29944
• Last update: 10.03.2025, 11:42 AM CET