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Sustaining the buyout governance model: inside secondary management buyout boards

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journal contribution
posted on 2023-06-09, 12:10 authored by Ranko JelicRanko Jelic, Dan Zhou, Mike Wright
We examine the impact of private equity (PE) directors and their human capital on operating performance in a unique hand collected sample of 200 secondary management buyouts (SMBOs) during 2000-2015. We show that PE directors’ human capital tends to play statistically and economically important role in performance. Financial (rather than operational) experience of PE directors in acquiring PE firms tends to have a substantial impact on post-SMBO profitability while high level business education is especially important in post-SMBO growth performance enhancement. Complementary expertise, provided by directors in buying and selling PE firms, plays an important role only in post-SMBO growth improvements. Overall, our results provide evidence that governance benefits of the buyout model tend not to be exhausted in the primary buyout stage but the effects in the secondary buyout phase depend on the nature of PE directors’ human capital resource, notably in respect of the balance between board monitoring and advisory roles. Our study therefore adds to growing evidence on how ownership and life-cycle nature of firms affect sustainability of boards fulfilling their roles. The results are robust to sample selection bias, different types of PE firms and different measures of human capital.

History

Publication status

  • Published

File Version

  • Accepted version

Journal

British Journal of Management

ISSN

1045-3172

Publisher

Wiley

Issue

1

Volume

30

Page range

30-52

Department affiliated with

  • Accounting and Finance Publications

Full text available

  • Yes

Peer reviewed?

  • Yes

Legacy Posted Date

2018-02-15

First Open Access (FOA) Date

2021-01-30

First Compliant Deposit (FCD) Date

2018-02-15

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