Working Paper: NBER ID: w23626
Authors: Shai Bernstein; Josh Lerner; Filippo Mezzanotti
Abstract: Do private equity firms contribute to financial fragility during economic crises? We find that during the 2008 financial crisis, PE-backed companies increased investments relative to their peers, while also experiencing greater equity and debt inflows. The effects are stronger among financially constrained companies and those whose private equity investors had more resources at the onset of the crisis. PE-backed companies consequentially experienced higher asset growth and increased market share during the crisis.
Keywords: private equity; financial crisis; investment; firm performance
JEL Codes: E32; G24
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| PE-backed companies (G34) | decreased their investments less than non-PE-backed companies (G31) |
| PE-backed companies (G34) | access financing more effectively (G29) |
| PE-backed firms with more resources (G32) | greater investment increases (E22) |
| PE-backed companies (G34) | did not experience a decline in profitability (L25) |
| PE-backed companies (G34) | increased their market share (L19) |
| PE-backed companies (G34) | did not show a higher likelihood of bankruptcy (K35) |