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Performance Benefits of Tight Control

The Journal of Private Equity, Vol. 18, Issue 3, pp.41-54

Authors:
Andrej Gill,
Nikolai Visnjic
Research Area:
Law and Finance, Transparency Lab, Experiment Center
Date:
Jan 2015
Keywords:
private equity, leveraged buyouts, active shareholders, ownership concentration, corporate governance
Abstract:

This study investigates the transition from being a listed company with a dispersed ownership structure to being a privately held company with a concentrated ownership structure. We consider a sample of private equity backed portfolio companies to evaluate the consequences of the corporate governance changes on operational performance. Our analysis shows significant positive abnormal growth in several performance ratios for the private period of our sample companies relative to comparable public companies. These performance differences come from the increase in ownership concentration after the leveraged buyout transaction.

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