私募股权是否超过了投资组合公司？（英）-2022

Finance and Economics Discussion SeriesFederal Reserve Board, Washington, D.C.ISSN 1936-2854 (Print)ISSN 2767-3898 (Online)Does Private Equity Over-Lever Portfolio Companies?Sharjil Haque2023-009Please cite this paper as:Haque, Sharjil (2023). “Does Private Equity Over-Lever Portfolio Companies?,” Financeand Economics Discussion Series 2023-009. Washington: Board of Governors of the FederalReserve System, https://doi.org/10.17016/FEDS.2023.009.NOTE: Staff working papers in the Finance and Economics Discussion Series (FEDS) are preliminarymaterials circulated to stimulate discussion and critical comment. The analysis and conclusions set forthare those of the authors and do not indicate concurrence by other members of the research staff or theBoard of Governors. References in publications to the Finance and Economics Discussion Series (other thanacknowledgement) should be cleared with the author(s) to protect the tentative character of these papers. Does Private Equity Over-Lever Portfolio Companies?∗Sharjil M. Haque†This Version: November 2022AbstractDetractors have warned that Private Equity (PE) funds tend to over-lever theirportfolio companies because of an option-like payoff, building up default risk and debtoverhang. This paper argues PE-ownership leads to substantially higher levels ofop-timal(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 modelwhere leverage is chosen by the PE investor. The model is able to explain both thelevel and change in leverage documented empirically following buyouts. The increasein optimal leverage is driven primarily by a reduction in the portfolio company’s assetvolatility and, to a lesser extent, an increase in asset return. Counterfactual analysisshows significant loss in firm value if PE sub-optimally chose lower leverage. Consis-tent with lower asset volatility, additional tests show PE-backed firms experience lowervolatility of sales and receive greater equity injections for distress resolution, comparedto non PE-backed firms. Overall, my findings broaden our understanding of factorsthat drive buyout leverage.Keywords:Private Equity; Capital Structure; Default Risk; Trade-off Theory∗The views expressed in this paper are those of the author and do not necessarily represent the views ofthe Federal Reserve Board or the Federal Reserve System. Bureau van Dijk’s Orbis and Zephyr data, andCompustat Global/North America data were obtained by the author prior to employment at the FederalReserve Board, while he was a Ph.D. candidate at the University of North Carolina at Chapel Hilll. Iam indebted to Greg Brown and Anusha Chari for their outstanding support and guidance. I would alsolike to thank Gustavo Cortes, Abed Farroukh, Mark Humphery-Jenner and Simon Schmickler (discussants).Many helpful comments and suggestions were received from Oleg Gredil, Ivan Ivanov, Anil K. Jain, YoungSoo Jang, Tim Jenkinson, Christian Lundblad, Doriana Ruffino, Jacob Sagi, Elena Simintzi as well asseminar and conference participants at the Annual Private Equity Research Conference (PERC), Fed Board,Richmond Fed, Princeton’s Young Economist Symposium, 2021 FMA Annual Meeting, Australasian Finance& Banking Conference, Society for Nonlinear Dynamics and Econometrics, Southern Methodist Universityand UNC Chapel Hill.†Economist, Board of Governors of the Federal Reserve System. Email:sharjil.m.haque@frb.gov. 1 IntroductionIt is well-known that Private Equity (PE) funds acquire companies in leveraged buyouts(LBO) using substantial amount of debt (Kaplan and Stromberg, 2009). The sharp increasein portfolio company leverage following a PE-sponsored buyout has generated conflictingviews.1One well-known view is that PE fund managers over-leverage their portfolio compa-nies (Kaplan and Stein, 1990; Andrade and Kaplan, 1998), and buyout capital structure isprimarily driven by credit market conditions instead of debt capacity of a given firm (Axel-son, Jenkinson, Str ̈omberg, and Weisbach, 2013). The alternate view is that high leverage isefficient since PE leads to lower debt-equity conflicts for a given debt ratio relative to pub-lic firms (Malenko and Malenko, 2015), thereby allowing PE-backed firms to trade off thebenefits of higher debt against potentially lower expected cost of financial distress. Whicheffect dominates is thus an empirical question.In this paper, I examine if PE investors systematically over-lever portfolio companies andestimate theoptimal(value-maximizing) leverage of PE-backed firms. If PE sponsors over-leverage and overpay for deals as suggested by Axelson et al. (2013) and Axelson, Str ̈omberg,and Weisbach (2009), we would expect optimal leverage of portfolio firms to be meaningfullylower than what we see in the data, which can lead to significant aggregate costs (Far