Managerial Incentives and Value Creation: Evidence from Private Equity

This paper was motivated by the increasing interest in the current debate for the entrepreneurial process in family firms. Little research to date has investigated the family business exit and this topic is mainly considered as a failure for entrepreneurial families. However, when uncertainties arise concerning generational succession, the family business exit may enable ownership transitions facilitating survival and long term value creation strategies. Among the exit options, a private equity buyout may balance the family’s wealth protection and the firm’s future growth. However, which family specific characteristics and strategic needs may affect the exit option still remains a neglected topic. Based on recent research addressing entrepreneurship in family firms and corporate governance literature, this paper develops a case study for investigating the bridging role of private equity buyout for going through strategic transitions in family firms. Findings suggest that a private equity buyout is a governance mechanism which may sustain an entrepreneurial transition by realigning family interests and goals. It may also allow the family commitment for improving organizational capabilities required by an entrepreneurial transition.

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Creating value in investments with the use of private equity funds

Journal of Management and Financial Sciences ◽

10.33119/jmfs.2020.40.1 ◽

2020 ◽

pp. 9-20

Author(s):

Olga Mikołajczyk ◽

Bartosz Owedyk

Keyword(s):

Literature Review ◽

Foreign Language ◽

Value Creation ◽

Private Equity ◽

Investment Value ◽

Equity Funds ◽

Private Equity Funds ◽

Equity Investments ◽

Language Literature ◽

Private Equity Investments

The influence of the private equity sector on the contemporary economy is quite significant. This is why the present paper attempts to examine mechanisms private equity investors apply in order to increase the value of their investments. The literature review has identified the most fundamen- tal elements of creating value on the basis of empirical, academic studies that verified hypotheses regarding the influence of particular mechanisms on the process of value creation in private equity investments. This paper is divided into five parts that describe the elements of the investment pro- cess, research into value creation, financial arbitration, as well as direct and indirect mechanisms of creating investment value. The paper is mainly based on the review of foreign-language literature.

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