Private Equity, Jobs, and Productivity—Online Appendix

Steven J. Davis; John  Haltiwanger; Kyle  Handley; Ron  Jarmin; Josh   Lerner; Javier  Miranda

Other Article | American Economic Review | December 2014

Private Equity, Jobs, and Productivity—Online Appendix

by Steven J. Davis, John Haltiwanger, Kyle Handley, Ron Jarmin, Josh Lerner and Javier Miranda

Abstract

Private equity critics claim that leveraged buyouts bring huge job losses. To investigate this claim, we construct and analyze a new dataset that covers U.S. private equity transactions from 1980 to 2005. We track 3,200 target firms and their 150,000 establishments before and after acquisition, comparing outcomes to controls similar in terms of industry, size, age, and prior growth. Relative to controls, employment at target establishments declines 3% over two years post buyout and 6% over five years. The job losses are concentrated among public-to-private buyouts and transactions involving firms in the service and retail sectors. But target firms also create more new jobs at new establishments, and they acquire and divest establishments more rapidly. When we consider these additional adjustment margins, net relative job losses at target firms are less than 1% of initial employment. In contrast, the sum of gross job creation and destruction at target firms exceeds that of controls by 13% of employment over two years. In short, private equity buyouts catalyze the creative destruction process in the labor market, with only a modest net impact on employment. The creative destruction response mainly involves a more rapid reallocation of jobs across establishments within target firms.

Keywords: Job Cuts and Outsourcing; Private Equity; Performance Productivity;

Format: Electronic

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Citation:

Davis, Steven J., John Haltiwanger, Kyle Handley, Ron Jarmin, Josh Lerner, and Javier Miranda. "Private Equity, Jobs, and Productivity—Online Appendix." American Economic Review 104, no. 12 (December 2014).

Article | Journal of Financial Economics | May 2020

The Creation and Evolution of Entrepreneurial Public Markets

Shai Bernstein, Abhishek Dev and Josh Lerner

This paper explores the creation and evolution of new stock exchanges around the world geared towards entrepreneurial companies, known as second-tier exchanges. Using hand-collected novel data, we document the proliferation of these new stock exchanges that were created in a large number of countries, attracted a significant volume of global IPOs, were introduced fairly cyclically, and had lower listing requirements when compared to first-tier stock exchanges. We find that increases in demand for entrepreneurial capital—as proxied for by patenting, IPOs, and stock market valuations—led to a higher likelihood of the introduction of second-tier exchanges. We find no evidence that new second-tier exchanges diverted the existing flow of IPOs from established stock exchanges. Shareholder protection strongly predicted exchange success, even in countries with high levels of venture capital activity, patenting, and financial market development. Second-tier exchanges in countries with better shareholder protection allowed younger, less profitable, but faster-growing companies to raise more capital. These results highlight the importance of institutions in enabling the provision of entrepreneurial capital to young companies.

Keywords: entrepreneurial finance; stock exchanges; Entrepreneurship; Finance; Initial Public Offering; Capital;

Citation:

Bernstein, Shai, Abhishek Dev, and Josh Lerner. "The Creation and Evolution of Entrepreneurial Public Markets." Journal of Financial Economics 136, no. 2 (May 2020): 307–329. View Details

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In the fall of 2018, Hiro Mizuno, the Chief Investment Officer (CIO) of GPIF, the Japanese Government Pension Fund, was reflecting on his efforts to integrate Environmental, Social and Governance (ESG) issues into every aspect of GPIF’s portfolio. His efforts ranged from constructing new stock market indices based on ESG data, changing the compensation and incentives of active investment managers and passive funds, pushing for more corporate sustainability reporting and integrated reporting, and establishing collaborations with other asset owners to drive systems level change. He was convinced that the only way to meet his responsibilities to his beneficiaries was to improve the performance of the entire economy through a focus on improving corporate governance, increasing inclusion in the workplace and gender diversity and reducing environmental damage and progress towards tackling climate change. The early results from his efforts were promising, but was there more he could do?

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Private Equity, Jobs, and Productivity—Online Appendix

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