Change search
CiteExportLink to record
Permanent link

Direct link
Cite
Citation style
  • apa
  • harvard1
  • ieee
  • modern-language-association-8th-edition
  • vancouver
  • Other style
More styles
Language
  • de-DE
  • en-GB
  • en-US
  • fi-FI
  • nn-NO
  • nn-NB
  • sv-SE
  • Other locale
More languages
Output format
  • html
  • text
  • asciidoc
  • rtf
Family firms performance and Private Equity investment: A Propensity Score Matching approach.
Jönköping University, Jönköping International Business School.
2012 (English)Independent thesis Advanced level (degree of Master (One Year)), 10 credits / 15 HE creditsStudent thesis
Abstract [en]

Private equity analysis on family firm’s research it is still embryonic. This study approaches such deficiency analysing the impact of private equity investment on Swedish family firm’s performance. A set of 662 family firms is studied over the period 2001-2010 using the Propensity Score Matching (PSM) method. In accordance to previous studies the impact results to be slightly positive on profitability ratios. Return on total assets and return on equity seemed to have positive and significant impacts, especially after three years of the private equity investment. A potential reason for such positive impacts is the supply of financial and non-financial resources to cover typical deficiencies of family firms. The intertwining of family and business might bring positive elements (stewardship-like behaviours) that enhance performance, like a profound and true commitment with the company. But also it might bring negative elements (stagnation-like behaviours) such as prioritizing personal objectives over company’s profit maximization. The family firms tested in this study seemed to be undervalued by Private Equity Firms because they perceive that family firms are dominated by stagnation-like behaviours. However, this suggests that private equity firms have a bargaining power because shares on family firms can be bought at a discount price. This seem to be an incentive for private equity firms to invest in these types of family firms and take advantage of hidden growth potential that they may own and still preserve despite of stagnation like situations. Hence, family firms with private equity investment seemed to outperform family firms without private equity investment.

Additionally, it is found that a significant impact on capital structure and overall company value also might be caused by private equity investment. Long-term gearing seems to decrease. However, a significant but minor decrease on equity vs. total assets ratio -solvency ratio- suggests the raise of short-term debt and an almost constant level of equity after the private equity entry. This, probably with the aim of rapidly accelerating returns on the investment. In accordance to previous research private equity firms could be interested in to raise debt in the acquired company and to invest fewer equity funds to accelerate the extraction of returns over their investment. Yet, this could not be the case in family firms due to the remaining control of family owners or managers that prevent indiscriminate raise of long-term debt that might elevate the default risk of the company. This is supported by the highly significant positive impact on value of total assets of family firms in years after private equity investment.

Place, publisher, year, edition, pages
2012. , p. 70
Keywords [en]
Private equity, family firms, performance, investment
National Category
Economics
Identifiers
URN: urn:nbn:se:hj:diva-18514OAI: oai:DiVA.org:hj-18514DiVA, id: diva2:534502
Subject / course
IHH, Economics
Uppsok
Social and Behavioural Science, Law
Supervisors
Examiners
Available from: 2012-08-31 Created: 2012-06-17 Last updated: 2012-08-31Bibliographically approved

Open Access in DiVA

Jenniffer Solorzano Diva(1360 kB)310 downloads
File information
File name ATTACHMENT01.pdfFile size 1360 kBChecksum SHA-512
59b7dc043224ee9e38caafcc79c5cecfe42dfc20bfd2aebcf4cb9d070a191a37c22a91ccaf0a205a3a75d288970b1fc697e60d067e7b13bb9d4fcb89f22067ac
Type attachmentMimetype application/pdf

By organisation
Jönköping International Business School
Economics

Search outside of DiVA

GoogleGoogle Scholar
The number of downloads is the sum of all downloads of full texts. It may include eg previous versions that are now no longer available

urn-nbn

Altmetric score

urn-nbn
Total: 106 hits
CiteExportLink to record
Permanent link

Direct link
Cite
Citation style
  • apa
  • harvard1
  • ieee
  • modern-language-association-8th-edition
  • vancouver
  • Other style
More styles
Language
  • de-DE
  • en-GB
  • en-US
  • fi-FI
  • nn-NO
  • nn-NB
  • sv-SE
  • Other locale
More languages
Output format
  • html
  • text
  • asciidoc
  • rtf