Mala Tempora Currunt: How Do PE-Backed
Firms React to Financial Crises?

Abstract

How has PE backing influenced the operating performance of firms (primarily in terms of ROA and ROE) during the recent financial crisis (2006–2010)? In this study, the authors use a dataset of 939 European PE-backed firms and a control sample of 2,516 European non-PE-backed firms. They find that PE-backed firms are more profitable than non-PE-backed firms. Even though the recent financial crisis had a negative effect on the operating performance of both PE- and non-PE-backed firms, the authors report strong evidence that the former have a greater ability to withstand turbulent economic environments.

TOPICS: Private equity, financial crises and financial market history, developed, statistical methods