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The Operational Consequences of Private Equity Buyouts: Evidence from the Restaurant Industry
Abstract
Do private equity buyouts disrupt company operations to maximize short-term goals? We document significant operational changes in 103 restaurant chain buyouts between 2002 and 2012 using health inspection records for over 50,000 stores in Florida. Store-level operational practices improve after private equity buyout, as restaurants become cleaner, safer, and better maintained. Supporting a causal interpretation, this effect is stronger in chain-owned stores than in franchised locations -- “twin restaurants” over which private equity owners have limited control. Private equity targets also reduce employee headcount, lower menu prices, and experience a lower likelihood of store closures -- a proxy for poor financial performance. These changes to store-level operations require monitoring, training, and better alignment of worker incentives, suggesting PE firms improve management practices throughout the organization.
... By contrast, centralized firms may experience delays in responding strategically to local developments because they must coordinate their actions with headquarters, limiting their ability to take advantage of the rent reduction. The literature on organizational structure suggests that company-owned restaurants are more likely to be centrally managed, with headquarters exerting greater influence over daily operational decisions, while franchise-based restaurants tend to be more decentralized, with each franchisee having greater autonomy over such decisions (Bernstein and Sheen (2016)). 6 This literature also finds that company-owned chains with fewer stores are more decentralized than company-owned chains with more stores. ...
... Debt overhang may interact with organizational frictions (Krueger (1991), Bernstein and Sheen (2016), and Aghion et al. (2021)). We test four hypotheses regarding heterogeneity in the treatment effect based on the organizational structure of the restaurant: information frictions, internal capital markets, economies of scale, and monetary incentives. ...
... By contrast, centralized firms may experience delays in responding to local developments because decisions must be coordinated with headquarters, potentially blunting the effectiveness of a rent reduction. The literature on organizational structure suggests that company-owned restaurants are more likely to be centrally managed, with headquarters exerting greater influence over daily operational decisions, while franchise-based restaurants tend to be more decentralized, with each franchisee having greater autonomy over such decisions (Bernstein and Sheen (2016)). This literature also finds that companyowned restaurants with fewer stores are more decentralized than company-owned restaurants with more stores. ...
Using data on nearly 20,000 restaurants in China during the COVID-19 outbreak, we find evidence that the government-sponsored rent reduction program reduced debt overhang problems. Rent reductions, which averaged 36,000 RMB per restaurant, increase the open rate of restaurants by 3.7%, revenue by 11,000 RMB, and the number of employees by 0.36. Larger restaurants with higher committed costs benefit more from the rent reduction. The stimulus has a positive spillover effect that boosts the revenue of restaurants in the immediate vicinity of subsidized restaurants. The treatment effect varies with organizational structure in a manner consistent with an information frictions hypothesis.
... 14 Bernstein and Sheen (2016), however, found that private equity owners of a franchised restaurant chain were less able to realize synergies than owners of company-owned outlets due the reduced control franchising involves. 15 Whether a franchise system is acquired or not is obviously not exogenous. ...
Please scroll down for article-it is on subsequent pages With 12,500 members from nearly 90 countries, INFORMS is the largest international association of operations research (O.R.) and analytics professionals and students. INFORMS provides unique networking and learning opportunities for individual professionals, and organizations of all types and sizes, to better understand and use O.R. and analytics tools and methods to transform strategic visions and achieve better outcomes. For more information on INFORMS, its publications, membership, or meetings visit Abstract. It has long been argued that acquisitions can enable new owners to make changes to target firms that target owners could not make due to implicit commitments to the target's stakeholders. The empirical evidence for this idea has been thin, however. We develop evidence for it in data on acquisitions of entire franchise systems. We show that acquisition of these systems tends to result in higher royalty fees, especially in systems in which "entitlement constraints" bind more tightly, namely where multiunit franchising is emphasized and where franchise units are older. The implication is that relieving entitlement constraints may be an important motive for, or at least an additional benefit of, some acquisitions.
... , Guo et al. (2011), and Acharya et al. (2013) conclude that target companies increase operating efficiency, improve corporate governance, and implement changes in their capital structure after an LBO. Other examples are Kaplan (1989), Lehn and Poulsen (1989), Smith (1990), Lerner et al. (2011), Harford andKolasinski (2014), or Bernstein and Sheen (2016). Excellent reviews of literature include Metrick and Yasuda (2011) or Eckbo and Thorburn (2013). 2 The existence of the peer valuation error is in line with rational models in which the PE investor owns private information that is not part of investors' information set at time t (e.g., Rhodes-Kropf & Viswanathan, 2004). ...
Our paper provides a contribution to the literature on peer effects in leveraged buyouts and delivers an explanation for the seemingly contradicting findings in the existing literature. We find that the average peer announcement CAR amounts to −1.98%. A buyout may reveal private information about peer value and can also change in the competition within the buyout target industry. Our identification strategy to examine the information and competition channels relies on two quasi‐natural experiments, which generate exogenous variation in the information and competition environments. In addition, we analyze various mechanisms within these two channels by considering the cross‐section of peer CARs and by running additional tests. Our results support the revaluation and the competitive pressure hypotheses.
... On the one hand, PE's focus on improving the management practices of target companies and easy access to credit may boost quality. For example, Bernstein and Sheen (2016) report a positive impact of private equity buyouts in the restaurant industry, as restaurants become cleaner, safer, and better maintained. On the other hand, PE's focus on cost-cutting measures, their short-term horizons, and weak relationships with target firm stakeholders (Kaplan and Stromberg 2009) could affect quality adversely. ...
The provision of public services by for-profit and non-profit organizations is widespread in OECD countries, but the jury is still out on whether outsourcing has improved service quality. This article seeks to nuance existing debate by bringing to the fore variation in service quality between different types of non-public providers. Building on theories of dimensional publicness and incomplete contracts, we argue that different forms of non-public ownership are associated with varying intensity of incentives for profit maximization, ultimately affecting service quality. Using residential elder care homes in Sweden as our universe of cases, we leverage novel panel data for 2,639 facilities from 2012 to 2019, capturing the ownership type of the care home operators, against a set of indicators pertaining to inputs, processes, and outcomes. The results suggest that non-public providers with high-powered incentives to make profit, such as those owned by private equity firms and publicly traded companies, perform worse on most of the selected indicators compared to private limited liability companies and nonprofits. Our findings that the intensity of quality-shading incentives is not the same for all non-public providers have important implications for government contracting and contract management.
... (i) asset return/drift, and (ii) asset volatility. On drift rate, there is extensive literature that shows PE-owned firms are more efficient and profitable given better management and more aligned incentives (Bernstein and Sheen, 2016;Davis, Haltiwanger, Handley, Jarmin, Lerner, and Miranda, 2014). On asset risk, Malenko and Malenko (2015) show that for a given leverage ratio, debt-equity conflicts could be less severe when a firm is owned by a PE sponsor relative to a non-PE owned public company with dispersed shareholders. ...
Detractors have warned that Private Equity (PE) funds tend to over-lever their portfolio companies because of an option-like payoff, building up default risk and debt overhang. This paper argues PE-ownership leads to substantially higher levels of optimal (value-maximizing) leverage, by reducing the expected cost of financial distress. Using data from a large sample of PE buyouts, I estimate a dynamic trade-off model where leverage is chosen by the PE investor. The model is able to explain both the level and change in leverage documented empirically following buyouts. The increase in optimal leverage is driven primarily by a reduction in the portfolio company's asset volatility and, to a lesser extent, an increase in asset return. Counterfactual analysis shows significant loss in firmvalue if PE sub-optimally chose lower leverage. Consistent with lower asset volatility, additional tests show PE-backed firms experience lower volatility of sales and receive greater equity injections for distress resolution, compared to non PE-backed firms. Overall, my findings broaden our understanding of factors that drive buyout leverage.
... The impact of PE ownership on portfolio firms' behaviour and performance has been studied by scholars over the past three decades. A wide literature documents positive effects of PE ownership on various aspects of firm outcomes and performance, including (but not limited to) operating performance (Kaplan (1989), Boucly et al. (2011), Fracassi et al. (2022), productivity (Lichtenberg and Siegel (1990), Harris et al. (2005), Lerner et al. (2019)), innovation (Lerner et al. (2011), Amess et al. (2016)), employment (Davis et al. (2014)), exporting (Lavery et al. (2021), Wilson et al. (2022b)), insolvency risk (Wilson and Wright (2013)), performance during recessions (Wilson et al. (2012), Bernstein et al. (2019)), as well as, more recently, more diverse areas such as workplace safety and cleanliness and levels of maintenance (Bernstein and Sheen (2016), Cohn et al. (2021)). Recent academic studies have studied the performance of PE-backed companies in a difference-in-differences (DiD) setting, comparing the post-buyout performance of PE-backed companies to that of matched, nonsponsored control firms. ...
Existing evidence on the impact of PE ownership on portfolio company growth and performance focuses predominantly on the post buyout PE holding period. Using a sample of over 1,200 realized UK PE buyouts, we track the performance of target firms after the PE exit. We study average portfolio company growth rates in the post exit period relative to the PE holding period. Within a difference-indifferences setting, we find that the positive impact of PE ownership on firm sales, earnings, employment, market share, and productivity persists after PE exit relative to control firms. Our results suggest that this performance differential is limited to the smaller and younger portfolio companies. Gains to productivity and investment levels are found to be stronger in the long run than in the PE holding period. However, PE portfolio company operating performance is not found to be stronger in the post exit period relative to the holding period and compared to matched controls. We track incidence of financial distress via formal insolvency notices and find that PE-backed companies are more likely to enter into insolvency proceedings in the post exit period relative to the holding period and to control firms. Post exit insolvency risk is concentrated in larger and older firms.
... Additionally, companies' reputations may be enhanced by private equity acquisitions, resulting in greater access to financing ( Tyková 2018 ). Studies of the retail and restaurant industries bear these points out: demonstrating that private equity investment can increase sales and provide competitive returns to limited partners ( Bernstein and Sheen 2016 ;Fracassi, Previtero, and Sheen 2020 ). Conversely, some analysts associate private equity takeovers with a series of adverse business trends. ...
Private equity firms have become important financial actors in the US defense industry in recent years—acquiring over 500 defense contractors since the early 2000s. This inquiry describes how increased capital flows into private equity funds, rising national security budgets, Pentagon policy, and rapid industry consolidation have spurred private equity investment in the businesses of American defense. Subsequently, the study demonstrates two ways private equity acquisitions of corporations in the defense industry affect US national security. First, because private equity firms often fund acquisitions through leveraged buyouts, the debt obligations of private equity–owned defense contractors are characterized by a relatively high risk of credit default. Second, the debt burden private equity firms place on defense contractors often reduces these companies’ free cash flow. As an increasing number of defense contractors are acquired by private equity firms, aggregate corporate reinvestment in the defense industry may well decline, thus diminishing the ability of contractors to perform their national security obligations.
entreprises du secteur de la défense sociétés de capital-investissement et sécurité nationale aux états-unis
... Davis et al. (2014) measure significant increases in total factor productivity after PE buyouts but do not distinguish between buyouts of public and private targets in their analysis. 5 Bernstein and Sheen (2016) find evidence of reductions in health code violations after buyouts of restaurants in the USA. Eaton, Howell, and Yannelis (2020) find increases in student enrollment after buyouts of for-profit colleges. ...
Despite the prevalence of private equity (PE) buyouts of private firms, little is known about how these transactions create value. We provide evidence that PE acquirers disproportionately target private firms with weak operating profitability and those that have growth potential but are highly levered and dependent on external financing. Target firms grow rapidly post-buyout, especially those undertaking add-on acquisitions, and profitability increases for both profitable and unprofitable targets. Our evidence suggests that PE acquirers create value by relaxing financing constraints for firms with strong investment opportunities and improving the performance of weak firms, while financial engineering plays a limited role.
... Such innovative con- flicts seem to be even crucial and critically necessary for company growth and essential for the team performance. In the same context, and on analyzing the different contributions and advantages, the capital investor could bring about while investing the enterprise, Sheen Albert and Shai (2014) and Learner, Leamon, and Garcia-Robles (2014), stress highly the latter strategic role, through joint col- laboration of the other managers for the conception of their visions, by influencing the way how strategic decisions concerning strategic matters should be taken and through guiding the compa- ny's strategic choices and investment policy. The venture capitalist may also intervene at a more operational level through appealing to external consultants and consolers to fill their proper lack in matters of skills and knowledge, as well as the executive's lack regarding certain specific areas such as human resources, marketing, company environment, and market (Gerber & Hui, 2013). ...
The present research work is designed to examine the Tunisian corporate case financing strategy as undertaken by the venture capital institutions, on the basis of some criteria applied during the selection process. After discussing the theoretical relationship between the venture capitalist and the entrepreneur, we are advancing an empirical model testing the influence of the venture capitalist? selection criteria on the acceptance to finance the enterprise. Overall, the study?s reached finding, as conducted on a sample of 41 venture capital companies operating up until the end of the year 2016. In fact, the study have revealed well the significantly impact of certain adopted criteria in relation to the other criteria and it maintains that the venture capitalist? attitude towards the investment risk.?
... Since hotels and restaurants are often franchised, the absence of brand information means that there will be markets where two establishments of the same brand (e.g., Hilton hotels or Taco Bell) are collocated but are owned by two different franchisees. To the extent that brand collocation effects are meaningful (e.g., as in Ingram and Baum 1997;Bernstein, 2015), our firm-level results will underestimate the "true" collocation effect in two ways. ...
We study how intra-firm collocation—geographic clustering of business establishments owned by the same parent company—influences performance, decomposing the collocation effect into stocks and flows to learn about the mechanisms behind intra-firm agglomeration. Using Census micro data on the full population of U.S. hotels and restaurants from 1977-2007, we find that doubling the intensity of intra-firm collocation is associated with a productivity increase of about 2%. Further analyses reveal that a significant component of the productivity gains are attributable to stock effects, in the sense that productivity effects persist after an establishment ceases to be collocated. The results are consistent with the idea that proximity to other establishments owned by the same parent firm facilitates knowledge transfer, which has broad implications for firm strategy.
... Since hotels and restaurants are often franchised, the absence of brand information means that there will be markets where two establishments of the same brand (e.g., Hilton hotels or Taco Bell) are collocated but are owned by two different franchisees. To the extent that brand collocation effects are meaningful (e.g., as in Ingram and Baum 1997;Bernstein, 2015), our firm-level results will underestimate the "true" collocation effect in two ways. ...
We study how intra-firm collocation—geographic clustering of business establishments owned by the same parent company—influences performance, decomposing the collocation effect into stocks and flows to learn about the mechanisms behind intra-firm agglomeration. Using Census micro data on the full population of U.S. hotels and restaurants from 1977-2007, we find that doubling the intensity of intra-firm collocation is associated with a productivity increase of about 2%. Further analyses reveal that a significant component of the productivity gains are attributable to stock effects, in the sense that productivity effects persist after an establishment ceases to be collocated. The results are consistent with the idea that proximity to other establishments owned by the same parent firm facilitates knowledge transfer, which has broad implications for firm strategy.
... Lerner, Sorensen, and Stromberg (2011) find that firms undergoing LBOs have more cited patents. Bernstein and Sheen (2013) find that, in the context of firms in the restaurant industry, firms undergoing takeovers by PE firms experience significant operational improvements leading to better performance. Boucly, Sraer, and Thesmar (2011) use French data to find that following a leveraged buyout, targets become more profitable, grow much faster than their peer group, issue additional debt, and increase capital expenditures. ...
Using data on international leveraged buyout (LBO) investments, we analyze whether lack of proximity impedes the ability of U.S. private equity (PE) investors to successfully invest across borders. In particular, U.S. PE investors have substantial experience in monitoring and supporting portfolio firms, but have to trade off this advantage with the difficulty of monitoring cross-border LBO investments that are further away. We exploit the exogenous shock to “effective” proximity of U.S. PE investors to other countries due to open sky agreements (OSA) signed between the U.S. and the countries of potential LBO target firms. We find that increase in proximity due to the ease of travel afforded by an OSA between the U.S. and another country has a positive and statistically significant impact on U.S. PE firms’ propensity to invest in LBOs in that country. Further, improvements in ease of travel between the target firm country and the U.S. are followed by more successful LBO investments in those countries, and this effect is driven by investments made by U.S. PE investors. In addition, for the set of LBOs for which OSAs occur after the deal, LBOs backed by U.S. PE firms perform better when an OSA happens immediately subsequent to the deal rather than later. Moreover, our results do not reflect access to U.S. product or public financial markets, since we do not find any evidence that OSAs have an impact on success rates of investments by non-U.S. PE firms. Our results are broadly consistent with the idea that proximity is an important factor in PE investors’ decision to invest across borders. Further, proximity impacts the success of cross-border LBOs at least partly due to the effect of active monitoring by PE investors.
Existing Industrial Relations (IR) research suggests that Private Equity (PE) takeovers may have profound effects on the target firm's industrial relations policies and practices, most notably in terms of security of tenure and relative proclivity to engage in redundancies. This study supplements the literature by exploring the effects of PE takeovers on other firms in the same industry. We find that PE takeovers increase the sensitivity of target firms to wage costs; when there is an upward pressure on wages, they respond by shedding jobs to a greater extent than their non‐acquired same‐sector competitors. However, workers in non‐acquired firms were less likely to move to a firm that had been acquired by PE, even if pay was more than sectoral rates. Even if there is a strong emphasis on restraining wage costs in the target firm, PE takeovers do not necessarily lead to the degradation of employment practices elsewhere in the sector; rather, they may provide competitors opportunities to entice talented and skilled employees from the target firm.
Des que van aparèixer als EUA, el Venture Capital i el Private Equity han crescut fins a suposar un volum de més de 142 mil milions d'euros a tot el món. Empreses com Google, Zalando o Spotify són alguns èxits de l’ecosistema, que hi va apostar quan no eren més que una idea. La influencia del capital de risc en la generació de tecnologia i en la millora de la salut de les empreses és essencial per situar una economia a l’avantguarda de la innovació i el creixement econòmic.
We show how private equity (PE) buyouts fuel loan sales and non-bank participation in the U.S. syndicated loan market. Combining loan-level data from the Shared National Credit register with buyout deals from Pitchbook, we find that PE-backed loans feature lower bank monitoring, lower loan shares retained by the lead bank, and more loan sales to non-bank financial intermediaries. For PE-backed loans, the sponsor’s reputation and the strength of its relationship with the lead bank further reduce the lead bank’s retained share and monitoring. Our results suggest that PE sponsor engagement substitutes for bank monitoring, allowing banks to retain less skin-in-the game in the loans they originate and to sell greater loan shares to non-banks.
Defense contractors play an essential role in US security operations. Among other responsibilities, contractors manufacture arms, manage logistics, analyze intelligence, and carry out cybersecurity operations. Historically, defense contractors were either publicly traded corporations or privately owned companies. The past two decades, however, have seen a major shift in the ownership structure of the US defense industry. Private equity firms—once niche actors in the US national security marketplace—have carried out over 1,500 deals involving defense contractors since 2000. This study employs a mixed-methods research design to assess the effects of private equity investment on the financial stability of the US defense industry. Using data on over 8,000 defense contractors, the inquiry finds that contractors with private equity backing experience bankruptcy at higher rates than contractors with no prior private equity investment. In addition, the study evaluates private equity activity in the military satellite services market—a field of growing importance in the strategically important domain of outer space. The inquiry’s findings have notable international security implications. Given the US’ role as a lynchpin in numerous alliances around the world, higher rates of bankruptcy among defense contractors have the potential to affect the security of the United States and its allies.
Private equity firms are often criticized for their short-term view when preparing their portfolio companies for the IPO. We investigate whether private equity-backed IPO firms are riskier than other IPO firms at the IPO and beyond. Our initial results show that they are not riskier than their peers at time of the IPO. However, PE firms often stay longer, as shareholders, after the IPO and we find that PE-backed firms become riskier once the PE shareholders leave. We explore the source of risk by investigating the characteristics of various IPO and PE firms. We identify PE-appointed CEOs and short CEO tenure as associated with increased risk post PE exit.
Using the Shared National Credit supervisory data, we find Private Equity (PE) sponsored firms violate loan covenants more often than comparable non-PE firms. However, upon covenant violation, PE-sponsored borrowers experience relatively smaller reductions in credit commitments, suggesting lenders are more lenient with these borrowers. This limited-punishment effect exists in both covenant-heavy and covenant-lite loans but is stronger for banks with relatively higher capital. Limited punishment is driven by repeated deals and sponsor reputation, as well as the higher bargaining power of sponsors in loan renegotiation. Our results indicate sponsors generate financial flexibility by dampening debt contract enforcement for distressed borrowers.
We document the importance of a financial sponsor when a borrower violates a covenant, providing creditors the opportunity to enforce debt contracts. We identify private-equity (PE) sponsored borrowers in the Shared National Credit Program (SNC) data and find PE-sponsored borrowers violate covenants more often than comparable non-PE borrowers. Yet, compared to non-PE, PE-backed borrowers experience smaller reductions in credit commitment upon violation, suggesting lenders are lenient with PE sponsors. Moreover, this leniency is stronger among financially healthier lenders. We show that our results are consistent with a repeated-deals mechanism, as lenders frequently interact with financial sponsors and choose to preserve relationship rent. Consistent with this mechanism, we find little evidence that PE-sponsored loans eventually underperform relative to non-PE-sponsored ones following covenant violations. Our findings have important implications for understanding heterogeneity in debt contract enforcement and credit constraints faced by distressed borrowers with financial sponsors.
This paper examines how private equity (PE) buyouts affect export activity among target firms around the Brexit period. Using data on UK firms for 2012–2019 and difference‐in‐differences estimations for matched target versus non‐target firms, we assess how the unprecedented Leave vote affects portfolio firms' internationalization. We find that following the referendum, PE buyout targets are more likely to engage in exporting and are in turn more likely to increase the value of their exports and their export intensity relative to their non‐PE‐backed peers. We further find evidence of an active governance channel, whereby the benefits of PE investment after Brexit are more potent when greater governance changes occur on boards of directors, and for firms whose senior directors have more international experience.
ESG is both extremely important and nothing special. It's extremely important because it's critical to long-term value, and so any academic or practitioner should take it seriously, not just those with “ESG” in their research interests or job title. Thus, ESG doesn't need a specialized term, as that implies it's niche – considering long-term factors isn't ESG investing; it's investing. It's nothing special since it's no better or worse than other intangible assets that create long-term financial and social returns, such as management quality, corporate culture, and innovative capability. Companies shouldn't be praised more for improving their ESG performance than these other intangibles; investor engagement on ESG factors shouldn't be put on a pedestal compared to engagement on other value drivers. We want great companies, not just companies that are great at ESG.
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We investigate the effects of private equity firms on product markets using price and sales data for an extensive number of consumer products. Following a private equity deal, target firms increase retail sales of their products 50% more than matched control firms. Price increases—roughly 1% on existing products—do not drive this growth; the launch of new products and geographic expansion do. Competitors reduce their product offerings and marginally raise prices. Cross‐sectional results on target firms, private equity firms, the economic environment, and product categories suggest that private equity generates growth by easing financial constraints and providing managerial expertise. This article is protected by copyright. All rights reserved
We investigate how information flows within bank networks facilitate syndicate formation and lending in the leveraged buyout (LBO) market, where relationships between banks and borrowers are scarce and borrower opacity is high. Using novel measures that characterize a bank's ability to source and disseminate information within its loan syndication network, we show that the extent of this capability influences which banks join the syndicate, the share the lead bank holds, and LBO borrowing terms. Banks' ability to source and disseminate network-based information is particularly useful when ties to prospective borrowers are lacking, with the information flows extending beyond knowledge on PE firms and LBO targets.
We examine the effects of a franchisee's size, distance from headquarters, and local competition on voluntary compliance with corporate brand‐building initiatives at the outlet level. Specifically, we consider compliance with a corporate social responsibility effort to solicit charitable donations at the time of retail checkout, measuring compliance performance as the amount of donations received at each outlet. Our analysis utilizes an objective, longitudinal sample of 777 franchised outlets in a national quick‐service restaurant chain. Surprisingly, we find that distance from headquarters is positively related to compliance; we relate this finding to recent, extant research on geographic distances and franchisee behaviors. We find the beneficial effects of larger, multiunit franchisees are mitigated as franchisees' geographic distances from headquarters increase; we relate these findings to horizontal agency within franchising systems. We further find that franchised outlets in more competitive markets comply less with brand‐building initiatives, even less so when part of a larger franchisee network. Our results underscore the important moderating role franchisee size plays in outlets' compliance, which we link back to extant perspectives on agency theory. Supplemental analyses consider tensions between compliance and operational efficiency, as well as effects of hypothesized factors on another mandatory form of compliance.
This paper surveys the growing body of recent literature on venture capital (VC) and private equity (PE) and formulates an agenda for future research. Specifically, it covers and categorizes 314 articles that have appeared in top leading international journals since 2011 and points to areas that deserve deeper investigation. 67.8% of these works deal exclusively with VC and 26.8% deal exclusively with PE. The main “hot” topics in VC and PE research are: (1) heterogeneity (e.g., in affiliation, experience, reputation) within the VC and PE industries and its effects, (2) the causal link between VC and PE financing and various aspects of company performance, such as growth or innovation, (3) the performance of VC and PE funds and how to measure it properly. In the literature on VC, (4) internationalization and (5) the processes through which VC investors and entrepreneurs select and match with each other are also highly relevant topics. Most recent works (81.2%) are empirical and strategies that aim at identifying causal effects have been getting widespread. Although new sources of data have been used and the European (and to a lesser extent Asian) VC and PE industries have been gaining ground in recent research, more than 52% of all empirical papers still rely on US data.
This study is aimed to examine the major determinants of cognitive approach investigated with according to a set of 150 firms financed by Tunisian venture capital agencies observed over the period 2010–2015. We are led to conclude that some venture capitalist’s characters do appear to affect the cognitive contribution within funded firms. In addition, it has been revealed that the manager’s share held, the venture capitalist’ participation in the capital and the firm age appear to have a significant influence on the cognitive approach adopted by the venture capital.
The present research work’s major objective lies in investigating the scope of the venture capitalist’ cognitive contribution following their financial participation in the company's capital. Conducted on a sample of 70 Tunisian venture capital funded firms, operating up the year 2015, the survey reached findings have proved to reveal well the significant impact this financial intermediation mode appears to have on kindling cognitive resources, in its association with the contractor. Noteworthy, however, is that the cognitive contribution has been discovered to be constrained, in turn, by the venture capital organization’s proper ownership structure.
This study examines determinants of retail chains’ corporate social responsibility (CSR) communication on their web pages. The theoretical foundation for the study is signaling theory, which suggests that firms will communicate about their CSR efforts when this is profitable for them and when such communication makes it possible for outsiders to distinguish good from bad performers. Based on this theory, I develop hypotheses about retail chains’ CSR signaling. The hypotheses are tested in a sample of 208 retail chains in the Norwegian market. As hypothesized, I find that foreign chains, chains using private brands, and vertically integrated chains are more likely to signal, but I find no relationship between pricing and signaling. In further analysis using chains’ CSR memberships and certifications as the measure of signals, only the relationship between organizational form and signaling is replicated. In total, the findings give partial support to signaling theory.
This paper examines how firm investments in technology-based employee monitoring impact both misconduct and productivity. We use unique and detailed theft and sales data from 392 restaurant locations from five firms that adopt a theft monitoring information technology (IT) product. We use difference-in-differences models with staggered adoption dates to estimate the treatment effect of IT monitoring on theft and productivity. We find significant treatment effects in reduced theft and improved productivity that appear to be primarily driven by changed worker behavior rather than worker turnover. We examine four mechanisms that may drive this productivity result: economic and cognitive multitasking, fairness-based motivation, and perceived increases of general oversight. The observed productivity results represent substantial financial benefits to both firms and the legitimate tip-based earnings of workers. Our results suggest that employee misconduct is not solely a function of individual differences in ethics or morality, but can also be influenced by managerial policies that can benefit both firms and employees.
This paper was accepted by Serguei Netessine, operations management.
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