Earticle

초록

영어

Using a large sample of block share acquisitions in the U.S. during the period of 1990-2006, we examine the sources of value gains in private equity (PE) investment. We find that compared to non-PE acquirers, PE acquirers are more likely to have their representatives with finance experience on the target’s boards, particularly when the target performs poorly or when it has higher agency problems. PE acquirers are also more likely to designate their representatives with industry experience in the target’s industry into the target’s boards when the target has more complex operations (e.g., more segments or higher R&D intensity). The targets of the PE investors, particularly those whose boards have the representatives from PE investors, realize both higher abnormal announcement returns and better post-acquisition operating performance than do the targets of other acquirers. Target announcement returns and its post-acquisition operating performance are also higher when PEdesignated directors have expertise in the target industry, when they sit on the boards of poorly performing targets, or when they sit on the boards of targets with higher R&D intensity. These findings suggest that governance and operational engineering that PE acquirers apply to their targets constitutes important sources of value creation in PE minority equity investments and such value creation is particularly evident when the needs for target oversight and/or advice are greater.

목차

ABSTRACT
 I. Literature Review and Main Hypothesis
  A. Governance Engineering
  B. Operational Engineering
  C. Financial Engineering
 II. Sample Selection
  A. Data
  B. Descriptive Statistics
 III. Board Representation, CEO Turnover, and Managerial Compensation: Univariate Tests
  A. Governance Engineering
  B. Operational Engineering
  C. Financial Engineering
 IV. Sources of Value Creation: Target Announcement Returns and Post-Acquisition OperatingPerformance
  A. Announcement Effects
  B. Post-Acquisition Operating Performance
 V. Determinant of Board Representation and CEO Turnover
  A. Determinant of Board Representation
  B. Likelihood of Top Management Turnover
 VI. Additional Tests
  A. Endogeneity of Target Selection
  B. Buyout versus Venture Capital Funds
  C. Event Window
 VII. Summary and Conclusion
 REFERENCES
 Table

저자

• Guojun Chen [ Department of Finance, Eli Broad College of Business, Michigan State University, East Lansing, MI ]
• Jun-Koo Kang [ Division of Banking and Finance, Nanyang Business School, Nanyang Technological University, Singapore ]
• Jin-Mo Kim [ Department of Finance and Economics, Rutgers Business School, Rutgers University, Piscataway, NJ ]

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  2006~2024

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