forthcoming in European Financial Management

Spillovers of PE Investments

We investigate a potential primary effect of leveraged buyouts (LBOs) by private equity (PE) on peers in the same industry using data on US public-to-private LBO transactions between 1985 and 2016. We use a network-based instrumental variable approach to account for potential endogeneity concerns. Our findings indicate that the LBOs by PEs matter for peer firms' performance and corporate strategy relative to nonpeer firms. Our study supports a learning factor hypothesis, but we find no evidence to support the conjecture that peers lose due to the increased competitiveness of the LBO target.