Do Debt-Related Tax Savings Fuel Private Equity Performance?

摘要: Politicians and the public blame private equity (PE) firms to receive disproportionately high tax benefits due tax-deductibility of interest. In this paper we analyze contribution these shields PE performance. Based on a simple model identify two important drivers performance impact: debt levels past, current future owners portfolio firm negotiation power buyer seller at entry exit transaction. Differentiating between financial strategic investors with respect their target combining transaction, define four different cases be analyzed. Our results point towards moderate impact Only in one out find evidence for significant positive contribution. The reason effect is that part realized savings already contained firm´s entrance price thus paid upfront vendors firms. large sample more than 4000 deal cycles case account roughly third all cases.