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  • April 2019
  • Article
  • Review of Financial Studies

Private Equity and Financial Fragility during the Crisis

By: Shai Bernstein, Josh Lerner and Filippo Mezzanotti
  • Format:Print
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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

Citation

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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About The Authors

Shai Benjamin Bernstein

Entrepreneurial Management
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Josh Lerner

Entrepreneurial Management
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More from the Authors
  • The Use and Misuse of Patent Data: Issues for Finance and Beyond By: Josh Lerner and Amit Seru
  • Chime Solutions By: Shai Bernstein, William R. Kerr, Jim Matheson, Christopher Stanton and Ria Mazumdar
  • Shanghai Pudong Science and Technology Investment Co., Ltd.: December 2014 By: Josh Lerner
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