Contracts and Returns in Private Equity Investments
Journal
Journal of Financial Intermediation
ISSN
1042-9573
ISSN-Digital
1096-0473
Type
forthcoming
Date Issued
2012-09-05
Author(s)
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.
Language
English
Keywords
private equity funds
venture capital
IRR
covenants
board directors
HSG Classification
not classified
Refereed
Yes
Publisher
Elsevier
Publisher place
Amsterdam
Number
in press, available online
Subject(s)
Division(s)
Eprints ID
216971
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pereturns 17july2012_All_withnames.pdf
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Format
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