The Consequence of the Internationalization of Private Equity Partnerships:
Institutions, Information Asymmetry and Performance
Abstract
This is a study of the performance of Private Equity (PE) partnerships when they cross institutional regimes, focusing on what happens when Limited Partners (LPs) are based in different legal origins to General Partners (GPs). Using data from 3,658 buyouts between 2000 and 2016, we find that internationalized PE partnerships perform worse than ones that confine the partnership to members from the same regime. We ascribe this effect to the challenges in enforcing contracts and monitoring information asymmetries. In addition, we find that GPs’ experience does not mitigate this adverse effect, which we ascribe to overstretched capabilities and context-specific knowledge. LPs’ experience acts as a boundary condition to the above relationship: when LPs’ experience is high, the negative effect of PE internationalization of fund performance becomes even more sub-optimal; while both GPs and LPs might exhibit overconfidence, the adverse consequences of the latter may be worse, given information asymmetries in the PE partnership. We further find that funds where the GPs are from civil law countries and all of the LPs from common law ones do worse in terms of both IRRs and MOICs; we found that MOICs were also inferior when the converse is the case. We explore the reasons behind these findings and draw out their implications for theorizing and future inquiry on PE internationalization.
About Geoffrey Wood
Geoffrey Wood is Professor and DanCap Private Equity Endowed Chair, and Department Chair DAN Management at Western University in Canada. Previously, he served as Dean and Professor of International Business, at Essex Business School and before then as Professor of International Business at Warwick Business School, UK. He has authored/co-authored/edited eighteen books, and over two hundred and seventy articles in peer-reviewed journals. Geoff’s research interests centre on the relationship between institutional setting, corporate governance, firm finance, and firm level work and employment relations. He is a Fellow of the Academy of Social Sciences, and a Fellow of the British Academy of Management, and is also in receipt of an Honorary Doctorate in economics from Aristotle University, Greece. Geoffrey Wood is Editor in Chief of Human Resource Management Journal. He also edits the Chartered ABS Journal Guide ranking list. Previously he has served as Editor in Chief of the British Journal of Management (official journal of the British Academy of Management and of the Annals of Corporate Governance (official journal of the ICGS). He is outcoing editor in chief of the Academy of Management Perspectives (official journal of the Academy of Management). He has had numerous research grants, including funding councils (e.g. ESRC), government departments (e.g. US Department of Labour; UK Department of Works and Pensions), charities (e.g. Nuffield Foundation), the labour movement (e.g. the ITF) and the European Union.
Language
English
This is a free seminar. Registration is mandatory.