Articles

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

F. LOPEZ DE SILANES, L. PHALIPPOU, Oliver GOTTSCHALG

Journal of Financial and Quantitative Analysis

juin 2015, vol. 50, n°3, pp.377-411

Départements : Stratégie et Politique d’Entreprise, GREGHEC (CNRS)

Mots clés : Private equity, Diseconomies of scale

http://ssrn.com/abstract=1363883


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


JavaScriptSettings