The decisions of private equity firms affect the development of industries and national economies, yet little is known about how these decisions are made. Mark Broere uses proprietary survey data from 136 private equity firms (venture capital and buyout) located in the US, Canada, and Europe to explore determinants and rules of their decision-making. The results exhibit new facts about their objectives, success measures, decision criteria, exit decision power and rules. A discussion in light of existing financial theory highlights, e.g. the role of reputation, and potential pitfalls in the decision-making of practitioners. The author suggests that private equity firms might improve their performance by a more careful choice of decision rules and criteria and by a more consistent application of these across varying decision types.At the level of the private equity firm, portfolio company investments are illiquid because of high transaction costs in markets for private ... The typically very limited amount of historical market prices for private equity investments raises substantial issues for the calculation ... and Phalippou (2011) provide evidence for the pricing of liquidity risk in private equity returns Bodie, Kane, and Marcus ( 2008, pp.
|Title||:||Decision-Making in Private Equity Firms|
|Publisher||:||Springer Science & Business Media - 2013-10-04|