Vlerick Repository

Research Summary Private equity (PE) investors invest in a portfolio of firms, setting new, ambitious performance aspirations and providing monitoring and value-adding services to help management attain these aspirations. Integrating a behavioral theory of the firm and corporate governance perspective, this study investigates how portfolio firms respond to performance feedback, considering heterogeneity in PE investors' incentives and influence toward a given portfolio firm's strategic actions. Using unique data from a PE investor including direct aspirations measures, we find that (1) portfolio firms' performance relative to aspirations, and (2) the PE investor's relative investment amounts and experience of PE-appointed board members, interact to affect the distinct growth strategies (i.e., internal capital investments or external acquisitions) its portfolio firms pursue. Managerial Summary A PE investor may guide its portfolio firms differently. Incentives to intervene should be larger in case of larger investments, and influence should be more extensive in case of more senior PE board representatives. In this study, we examine how a PE investor's varying incentives and influence affect how PE-backed firms strategically react to underperformance and overperformance. We find that a PE investor pushes for capital investments but deters acquisitions as performance shortfalls increase in a portfolio firm, when they have made larger investments and appointed more senior board members. In case of overperformance, a PE investor pushes toward acquisitions (and against capital investments) when they have invested more. Surprisingly, the opposite holds in case of more senior board members.

In this article, we examine the multidimensional and multilevel nature of diversity in the context of corporate boards. Using the concept of faultlines, we argue that when gender and racial background aligns with human capital attributes of board members, faultlines may be formed with negative implications for firm performance. However, the potential negative impact of faultlines can be alleviated by overlaps in the characteristics of the CEO and minority directors. Specifically, we find that higher overlaps in tenure and personal range of functional experiences help overcome some of the disadvantages that minority directors face and moderate the relationship between board faultline strength and firm performance. Empirical tests using 14 years data on 262 firms belonging to S&P500 index largely support our theoretical ideas. Managerial Summary Boards often suffer from unhealthy team dynamics. In this article, we explore how alignment of board members' attributes may lead to potential subgroup formation within boards. Specifically, we examine how, under existing pressures to increase demographic diversity on corporate boards, alignment of human capital characteristics with gender and racial minority status may lead to the formation of board faultlines that negatively influence firm performance. Our results suggest that the CEO plays a pivotal role in overcoming negative consequences of board faultlines by utilizing shared tenure on board and common functional experiences with minority board members. Our research suggests that board selection needs to focus beyond scrutinizing individual-level human capital and instead understand alignments of directors' profiles that enable optimal board functioning.

Ondernemers staan voor vele uitdagingen. Het bedrijf laten groeien kan vaak enkel als de persoon achter de onderneming ook groeit. Met dit boek tracht Yannick Dillen, professor bij Vlerick Business School, om (toekomstige) bedrijfsleiders, bestuurders en managers een aantal cruciale inzichten te geven om van hen betere ondernemers te maken. Hierdoor zal ook hun bedrijf groter kunnen worden en meer impact creëren. In ’Groeien als ondernemer’ bundelt de auteur 36 laagdrempelige maar inspirerende take aways die hij de voorbije jaren neerschreef op basis van gesprekken met ondernemers in België en Nederland. Een praktische gids met gegarandeerde return on investment.