Private Equity in the Global Economy: Evidence of Industry Spillovers
Sedar Aldatmaz, Gregory Brown
Using a novel dataset on global private equity investments in 19 industries across 48 countries, we find that following investments by private equity funds labor productivity, employment, profitability, and capital expenditures increase for publicly-listed companies in the same country and industry. This suggests that positive externalities created by private equity firms are absorbed by other companies within the same industry. These effects are more pronounced in country-industries with higher levels of competition suggesting that the competitive pressure from private equity-backed firms forces industry peers to react. On the financial side, we provide evidence that buyout investments lead to higher debt levels within the industry. Overall, our findings suggest that private equity investments have important spillovers to the real economy.