When the going gets tough: Private equity firms' role as agents and the resolution of financial distress in buyouts
Meuleman, Miguel Wilson, N. Wright, M. Neckebrouck, Jeroen
Meuleman, Miguel
Wilson, N.
Wright, M.
Neckebrouck, Jeroen
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Publication Type
Journal article with impact factor
Editor
Supervisor
Publication Year
2022
Journal
Journal of Small Business Management
Book
Publication Volume
60
Publication Issue
3
Publication Begin page
513
Publication End page
540
Publication Number of pages
Collections
Abstract
Previous research has focused on a private equity (PE) firm’s role as principal in its relationship with the investee, but few studies have looked into their role as agents to their investors. We examine how a PE firm’s relationship as agent toward limited partners (LPs) and banks influences its incentives to resolve financial distress in the investee. We examine the effect of PE fundraising reputation, PE fundraising activity, and PE bank affiliation on the likelihood of a financially distressed buyout ending in bankruptcy. We build a unique dataset of 338 distressed buyouts in the UK to test our hypotheses.
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Journal Issue
Keywords
Buyouts, Private Equity, Distress, Agency Theory, Signaling Theory