"Private Equity and Long-Run Investment: The Case of Innovation"
©
The Journal of Finance,
April
2011
Volume: 66
|
Issue: 2
|
Pages: 445-477
Publication type: Journal article
Research Archive Topic: Business Economics and Public Policy, Corporate Finance
Abstract
A long-standing controversy is whether leveraged buyouts (LBOs) relieve managers from short-term pressures from public shareholders, or whether LBO funds themselves sacrifice long-term growth to boost short-term performance. We examine one form of long-run activity, namely, investments in innovation as measured by patenting activity. Based on 472 LBO transactions, we find no evidence that LBOs sacrifice long-term investments. LBO firm patents are more cited (a proxy for economic importance), show no shifts in the fundamental nature of the research, and become more concentrated in important areas of companies' innovative portfolios.
The PDF available here is the pre-peer reviewed version of the article published in final form at The Journal of Finance.
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