Working Paper: NBER ID: w22660
Authors: Victoria Ivashina; Josh Lerner
Abstract: The economics of partnerships have been of enduring interest to economists, but many issues regarding intergenerational conflicts and their impact on the continuity of these organizations remain unclear. We examine 717 private equity partnerships, and show that (a) the allocation of fund economics to individual partners is divorced from past success as an investor, being instead critically driven by status as a founder, (b) the underprovision of carried interest and ownership—and inequality in fund economics more generally—leads to the departures of senior partners, and (c) the departures of senior partners have negative effects on the ability of funds to raise additional capital.
Keywords: Private Equity; Partnerships; Carried Interest; Ownership; Fundraising
JEL Codes: G24; J33; L26
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| founder status (L26) | allocation of fund economics (D61) |
| economic inequality (D31) | departures of senior partners (M51) |
| departures of senior partners (M51) | ability to raise additional capital (G32) |
| founder status (L26) | departures of senior partners (M51) |
| economic inequality (D31) | ability to raise additional capital (G32) |