Decision-Making in Private Equity Firms: An Empirical Study by Mark Broere

By Mark Broere

The judgements of non-public fairness businesses impact the advance of industries and nationwide economies, but little is understood approximately how those judgements are made. Mark Broere makes use of proprietary survey information from 136 deepest fairness enterprises (venture capital and buyout) situated within the US, Canada, and Europe to discover determinants and principles in their decision-making. the consequences show new proof approximately their ambitions, good fortune measures, determination standards, go out selection energy and ideas. A dialogue in gentle of current monetary thought highlights, e.g. the function of attractiveness, and power pitfalls within the decision-making of practitioners. the writer means that deepest fairness organizations may perhaps enhance their functionality by way of a extra cautious selection of choice principles and standards and via a extra constant program of those throughout various determination types.

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2004, p. 182). The first part of this analysis investigates the types and causes of non-response, with a view to establishing whether causes for refusals to participate could be connected to the data measured in the survey. The second part of the analysis compares the characteristics of respondents and non-respondents, using data from the sample frame database. The last part of the analysis compares the characteristics of “early respondents” and “late respondents”, using data from the sample frame database, whereas the extent of a participant’s resistance to respond to the survey request is proxied by the number of reminders that a participant had received before responding.

1 Objectives There is almost no existing literature that explicitly discusses the objectives of private equity firms, but a number of studies make implicit assumptions about such objectives. g. Sahlman, 1990, p. 501), but they sometimes also refer to other aims. Gompers (1996), for example, hypothesizes that young venture capitalists take their portfolio companies public earlier than established venture capital firms in order to build a reputation (the grandstanding hypothesis). Black and Gilson (1998) also believe that reputation is important for private equity firms.

The data do not provide clear support for Lerner and Schoar’s (2004) prediction of a (direct) link between the liquidity of investors’ interests in the funds of a private equity firm and the intensity of asymmetric information about the quality of the private equity firm between inside investors and outside investors; instead, they appear to suggest that this relationship is moderated by reputation. If this holds true, Lerner and Schoar’s theory on the causes of illiquidity should be extended to account for the effects of reputation.

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