How private equity-backed buyout contracts shape corporate governance
Publication type
Journal article with impact factorPublication Year
2023Journal
Venture CapitalPublication Volume
25Publication Issue
2Publication Begin page
135Publication End page
160
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This paper explores how contracts in private equity-backed buyouts shape corporate governance in portfolio companies. Drawing upon agency theory and incomplete contracting theory, 34 actual contracts are analysed in detail. Contracts focus on reducing information asymmetries, mainly during the due diligence process, and aligning the goals of managers and PE investors during the investment period and at exit. Residual powers and contingencies are mainly used to deal with incomplete contract designs due to uncertainties. While some contractual mechanisms are comparable to those used in VC contracts, others are idiosyncratic to PE.Keyword
Corporate GovernanceKnowledge Domain/Industry
Accounting & FinanceEntrepreneurship
ae974a485f413a2113503eed53cd6c53
10.1080/13691066.2022.2109224