Identifying the role of private equity firms in creating value

Takeovers of companies by private equity firms are often debated. Are private equity firms merely seeking short-term profit maximization? Or are they in fact creating value by being the cheapest mechanism to solve a friction in the Financial market? Empirical evidence points to some positive effects of private equity firms, but interpreting the results is difficult as there is no solid theoretical foundation. This particularly holds true for understanding implications of dynamic effects together with macroeconomic risk, information quality, and strategic issues among the private equity firm, the target firm, and other operating firms competing in the takeover. The project fills this gap. The results yield a theoretical framework pointing to necessary conditions for private equity firms to create value. This will impact the future debate on the role of private equity, lead to more precise empirical predictions, and help politicians determine the need for regulating private equity firms.

Engelsk