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Contribution Details
| Type | Journal Article |
| Scope | Discipline-based scholarship |
| Title | Contracts and returns in private equity investments |
| Organization Unit | |
| Authors |
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| Item Subtype | Original Work |
| Refereed | Yes |
| Status | Published in final form |
| Language |
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| Journal Title | Journal of Financial Intermediation |
| Publisher | Elsevier |
| Geographical Reach | international |
| ISSN | 1042-9573 |
| Volume | 22 |
| Number | 2 |
| Page Range | 201 - 217 |
| Date | 2013 |
| Abstract Text | We analyze the relationship between contracts and returns in private equity (PE) investments. Contractual control in the form of covenants tends to be employed to identify good deals. Better quality firms are more likely to have covenant-rich contracts, as they are less concerned by the constraints imposed by the covenants. PE investors appoint closer associates of the fund in deals that are performing poorly but tend to outsource board governance in better deals. Collectively, our evidence suggests that PE investors operate along two dimensions, choosing covenants and board seats differently, based on the ex ante quality of the company. |
| Digital Object Identifier | 10.1016/j.jfi.2012.08.002 |
| Other Identification Number | merlin-id:21810 |
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| Keywords | private equity funds; venture capital; IRR; covenants; board directors |