Essays In Management Of Private Equity Investments

Author : Troy D. Smith
Publisher :
ISBN 13 :
Total Pages : pages
Book Rating : 4.:/5 (91 download)

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Download or read book Essays on Productivity and Management written by Troy D. Smith and published by . This book was released on 2015 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation is comprised of three chapters. The first chapter examines the effects of private equity investment on the firms that receive this investment in India. While private equity (PE) is expanding rapidly in developing countries, there is little academic research on this subject. In this chapter I exploit two new data sources and employ two distinct empirical strategies to identify the impact of PE on Indian firms. I compare the investments made by one of India's largest PE firms to the investments that just missed (deals that made it to the final round of internal consideration). I also combine four large PE databases with accounting data on 34,000 public and private firms and identify effects using differences in the timing of investments. I find three results consistently in both databases. First, larger, more successful firms are more likely to receive PE investment. Second, firms that receive investment are more likely to survive and also have greater increases in revenues, assets, employee compensation, and profits. Third, somewhat surprisingly, these firms' productivity and return on assets do not improve after investment. This is consistent with PE channeling funding to high productivity firms rather than turning around low productivity firms. PE, at least in India, appears to alleviate expansion constraints and improve aggregate productivity through reducing misallocation rather than by increasing within-firm TFP. The second chapter, co-authored with Michael Dinerstein, examines the effects of a public school policy on local private schools and the market structure of the schooling market. On the order of 12% of urban private schools open or close every two years, yet the source and consequences of this churn are understudied. We consider how the supply response interacts with New York City's Fair Student Funding reform, which changed the budgets of the city's public schools starting in the 2007-08 school year. We find that relative to the schools that did not receive additional funding, elementary public schools that benefited from the reform saw an estimated increase in enrollment of 6.5%. We also find evidence of private school exit in response to the reform by comparing private schools located close to or far from public schools that received additional funding. A private school located next to a public school that received an average (6%) increase in its budget was an estimated 1.5 percentage points, on a base of 12%, more likely to close in the subsequent two years. We estimate a concise model of demand for and supply of private schooling and estimate that 30% of the total enrollment increase came from increased private school exit and reduced private school entry. Finally, we assess the reform's impact on aggregate achievement. We find that while the reform improved school quality at the public schools that received additional funding, the sorting of some students from private to public schools led them to lower-quality schools. This sorting undid much of the reform's positive achievement effect. The third chapter explores patterns of ownership and management in Indian firms and their associations with firm outcomes and productivity. While researchers have long been interested in the dynamics of firms that are owned and/or managed by families, data on such firms is scarce and it is even more difficult to follow such firms through time. In this Chapter I create three new measures of family ownership and family management in India and describe how these measures correlate with firm performance. Using my definitions, the percentage of listed family owned firms as well as the percentage of listed family managed firms has stayed fairly constant in India through time. Family owned firms are smaller, less productive, and have higher ROA than other firms in the economy suggesting that they could profitably expand. In contrast, firms that are managed by two or more individuals with a common surname are larger, more productive, and have higher returns than other firms. Firms in which owners are connected to top executives perform worse than firms that are family managed or firms that are family owned.