The effect of post-IPO private equity ownership : an empirical study of how post-IPO private equity ownership affects the stock market- and accounting performance of private equity-backed IPOs in the US

Private equity firms stay invested in their portfolio companies for up to several years after an initial public offering. Despite private equity firms having incentives and opportunities to continue influencing the companies, the effects of the retained ownership are uncertain. This study contributes to the understanding of how the long-run stock market- and accounting performance of portfolio companies is affected by private equity ownership post initial public offering. Panel data of publicly listed private equity-backed companies in the United States provides the basis for the analysis. Fixed effects, instrumental variable estimation, and simultaneous equations models are among the econometric methods used in this study, with a focus on dealing with the endogeneity of private equity ownership. We find that private equity ownership post initial public offering has a significant positive effect on the stock market return for the portfolio companies. We find no effect on return on assets or Tobin’s Q. These findings contribute to broadening existing literature by investigating an, to our knowledge, previously unexplored relationship.nhhma