Performance Benefits of Tight Control

Abstract

This study investigates the transition from being a listed company with a dispersed ownership structure to being a privately held company with a concentrated ownership structure. We consider a sample of private-equity-backed portfolio companies to evaluate the consequences of corporate governance changes on operational performance. Our analysis shows significant positive abnormal growth in several performance ratios for the private period of our sample companies relative to comparable public companies. These performance differences come from the increase in ownership concentration following a leveraged buyout transaction.

TOPICS: Private equity, equity portfolio management, performance measurement, statistical methods