Local Journalism under Private Equity Ownership

State versus Private Ownership

Private ownership should generally be preferred to public ownership when the incentives to innovate and to contain costs must be strong. In essence, this is the case for capitalism over socialism, explaining the "dynamic vitality" of free enterprise. The great economists of the 1930s and 1940s failed to see the dangers of socialism in part because they focused on the role of prices under social...

Managerial Hedging and Equity Ownership

Managerial Hedging and Equity Ownership Risk-averse managers can hedge the aggregate component of their exposure to firm’s cash flow risk by trading in financial markets, but cannot hedge their firm-specific exposure. This gives them incentives to pass up firm-specific projects in favor of standard projects that contain greater aggregate risk. Such risk substitution gives rise to excessive aggr...

Earnings Quality and Ownership Structure: The Role of Private Equity Sponsors*

This study explores how firms’ ownership structures affect their earnings quality and long-term performance. Focusing on a unique sample of private firms for which there is financial data available in the years before and after their initial public offering (IPO), I differentiate between those that have private equity sponsorship (PE-backed firms) and those that do not (non-PEbacked firms). The...

Investing in Private Equity

Ownership Efficiency and Tax Advantages : The Case of Private Equity Buyouts

Private equity firms are drivers of the ongoing international restructuring process. Extensive use of leverage gives private equity firms a tax advantage in the market for corporate control. We show that with limited deductibility of acquisition costs, these tax advantages will affect the efficiency of the market for corporate control: a private equity firm can outbid more efficient incumbent b...