Private Equity and Financial Fragility during the Crisis

Shai  Bernstein; Josh   Lerner; Filippo  Mezzanotti

Article | Review of Financial Studies | April 2019

Private Equity and Financial Fragility during the Crisis

by Shai Bernstein, Josh Lerner and Filippo Mezzanotti

Abstract

Do private equity firms contribute to financial fragility during economic crises? We find that during the 2008 financial crisis, PE-backed companies increased investments relative to their peers, while also experiencing greater equity and debt inflows. The effects are stronger among financially constrained companies and those whose private equity investors had more resources at the onset of the crisis. PE-backed companies consequentially experienced higher asset growth and increased market share during the crisis.

Keywords: Private Equity; Financial Crisis; Performance; Financial Condition;

Format: Print

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Bernstein, Shai, Josh Lerner, and Filippo Mezzanotti. "Private Equity and Financial Fragility during the Crisis." Review of Financial Studies 32, no. 4 (April 2019): 1309–1373. (Earlier version distributed as National Bureau of Economic Research Working Paper No. 23626 and Harvard Business School Working Paper No. 18-005.)

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Private Equity and Financial Fragility during the Crisis

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