Empirical Part I: Diversification and Performance
Some private equity firms may well find that they have bitten off more than they can chew. But it would be wrong to assume that the challenge private equity firms pose to the public equity model is about to ease
Andreas Beroutsos, Conor F. Kehoe,
The first empirical part of this study concentrates on the question how diversification affects performance, in private equity firms on a standalone basis and in comparison to public corporations. Many critics of the private equity phenomenon doubt the performance advantage of PEs due to the conglomerate structure of their investment portfolios, which they have accumulated throughout the past boom years of buyouts. Others on the contrary believe in the superiority of private equity in managing diversified investment portfolios. Although this controversy has been subject to public discussion in recent years, academic research has so far failed to shed light on the performance differences of private equity firms and public...