Buyout Activity: The Impact of Aggregate Discount Rates

• 成果类型: Article
• 署名作者: Haddad, Valentin; Loualiche, Erik; Plosser, Matthew
• 署名单位: Princeton University; National Bureau of Economic Research; Massachusetts Institute of Technology (MIT); Federal Reserve System - USA; Federal Reserve Bank - New York
• 刊物名称: JOURNAL OF FINANCE
• ISSN/ISSBN: 0022-1082
• DOI: 10.1111/jofi.12464
• 发表日期: 2017
• 页码: 371-414
• 关键词: expected stock returns; PRIVATE EQUITY FUNDS; Investor sentiment; Financial structure; merger waves; cash flow; performance; MARKET; fluctuations; determinants

摘要

Buyout booms form in response to declines in the aggregate risk premium. We document that the equity risk premium is the primary determinant of buyout activity rather than credit-specific conditions. We articulate a simple explanation for this phenomenon: a low risk premium increases the present value of performance gains and decreases the cost of holding an illiquid investment. A panel of U.S. buyouts confirms this view. The risk premium shapes changes in buyout characteristics over the cycle, including their riskiness, leverage, and performance. Our results underscore the importance of the risk premium in corporate finance decisions.