Contracts and Returns in Private Equity Investments

Item Type Forthcoming
Abstract

We analyze the relationship between contracts and returns in private equity (PE) investments. Contractual control in the form of covenants tends to be employed to identify good deals. Better quality fi?rms are more likely to have covenant-rich contracts, as they are less concerned by the constraints imposed by the covenants. PE investors appoint closer associates of the fund in deals that are performing poorly but tend to outsource board governance in better deals. Collectively, our evidence suggests that PE investors operate along two dimensions, choosing covenants and board seats di¤erently, based on the ex-ante quality of the company.

Authors García-Appendini, Emilia; Ippolito, Filippo & Caselli, Stefano
Journal or Publication Title Journal of Financial Intermediation
Language English
Keywords private equity funds, venture capital, IRR, covenants, board directors
Subjects economics
Institute/School s/bf - Swiss Institute of Banking and Finance
HSG Classification not classified
Refereed Yes
Date 5 September 2012
Publisher Elsevier
Place of Publication Amsterdam
Number in press, available online
ISSN 1042-9573
ISSN-Digital 1096-0473
Publisher DOI 10.1016/j.jfi.2012.08.002
Depositing User Prof. PhD Emilia García-Appendini
Date Deposited 28 Sep 2012 11:47
Last Modified 23 Aug 2016 11:14
URI: https://www.alexandria.unisg.ch/publications/216971

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Citation

García-Appendini, Emilia; Ippolito, Filippo & Caselli, Stefano (2012) Contracts and Returns in Private Equity Investments. Journal of Financial Intermediation, (in press, available online). ISSN 1042-9573

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https://www.alexandria.unisg.ch/id/eprint/216971
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