Giants at the Gate: Investment Returns and Diseconomies of Scale in Private Equity

Lopez-de-Silanes, Florencio, Phalippou, Ludovic and Gottschalg, Oliver (2015) Giants at the Gate: Investment Returns and Diseconomies of Scale in Private Equity. Journal of Financial and Quantitative Analysis, 50 (3). pp. 377-411.

Abstract

We document the wide dispersion of private equity investment returns and examine performance determinants using a newly constructed database of 7,500 investments worldwide. One in ten investments does not return any money, whereas one in four has an IRR above 50%. Quick flips are associated with some of the highest returns. Performance does not appear scalable: Investments held by private equity firms in periods with a high number of simultaneous investments underperform substantially. Results are consistent with the theoretical literature on organizational diseconomies linked to firm structure. Private equity firms’ actions do not appear to be mechanical or easily scalable.

Item Type: Article
Keywords: private equity, diseconomies of scale, finance
Subject(s): Finance
Date Deposited: 07 Mar 2014 11:31
Last Modified: 27 Feb 2017 14:19
Funders: Not applicable
URI: http://eureka.sbs.ox.ac.uk/id/eprint/4981

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