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Determinants of International Buyout Investments

Published online by Cambridge University Press:  29 April 2022

Serdar Aldatmaz Open the ORCID record for Serdar Aldatmaz [Opens in a new window] ,
Greg W. Brown  and
Asli Demirgüç-Kunt
Serdar Aldatmaz*
Affiliation:
George Mason University School of Business
Greg W. Brown
Affiliation:
The University of North Carolina at Chapel Hill Kenan–Flagler Business School gregw-brown@unc.edu
Asli Demirgüç-Kunt
Affiliation:
The World Bank Chief Economist, Europe and Central Asia ademirguckunt@worldbank.org
*
saldatma@gmu.edu (corresponding author)
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Abstract

Using a proprietary data set on international private equity activity, we study the determinants of buyout investments across 61 countries and 19 industries over the period of 1990 to 2017. We find that countries with cyclically strong economies, more active stock and credit markets, and better rule of law experience more buyout activity. Countries also receive more buyout capital following investor protection and contract enforcement reforms. The set of determinants we identify appear somewhat unique to buyout investments, because other forms of investment such as foreign direct investment, gross capital formation, investments in R&D, and M&A activity do not respond similarly to these factors.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 58 , Issue 2 , March 2023 , pp. 875 - 913
Copyright
© The Author(s), 2022. Published by Cambridge University Press on behalf of the Michael G. Foster School of Business, University of Washington

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Footnotes

We thank Shai Bernstein, Douglas Cumming (the referee), Jarrad Harford (the editor), Filippo Mezzanotti, Paige Ouimet, Anil Shivdasani, Ting Xu, and seminar participants at the 2021 Singapore Private Equity Research Symposium, 2021 Midwest Finance Association Annual Meeting, and the University of North Carolina for helpful comments. We also thank UNC’s Institute for Private Capital and the PE Research Consortium for their support of this project. Burgiss generously provided the customized PE data set.

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