The Effect of Private Equity Ownership on Firm-Level Productivity

Sammanfattning: In this paper, we examine the effect of private equity ownership on target firm productivity, where productivity is measured in terms of total factor productivity and labor productivity. This is investigated by performing an event study on 80 Swedish investments during the years 2004 to 2013. We find abnormal productivity growth in private equity owned firms by approximately 10 percent during the investment holding period. The productivity growth seems to mainly derive from a transitory, albeit sustainable, effect, combined with a positively altered productivity growth path. Furthermore, the abnormal growth appears to be the result of two effects. Firstly, the first two years post buyout, target firms seem to increase output more than the counterfactual while maintaining inputs in line with the counterfactual. Secondly, year three post buyout and forward, we see indications of more efficient capital spending than the counterfactual.