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Investments, Financing Constraints and Buyouts: the Effect of Private Equity Investors on the Sensitivity of Investments to Cash Flow
Author(s) -
Ughetto Elisa
Publication year - 2016
Publication title -
the manchester school
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.361
H-Index - 42
eISSN - 1467-9957
pISSN - 1463-6786
DOI - 10.1111/manc.12085
Subject(s) - private equity , cash flow , leveraged buyout , finance , business , monetary economics , private equity firm , investment (military) , economics , differential (mechanical device) , venture capital , alternative investment , equity (law) , traditional investments , financial system , foreign direct investment , market liquidity , macroeconomics , engineering , politics , political science , law , aerospace engineering
The paper examines the relationship between investments and cash flows for a panel of 206 low‐ and medium technology firms located in the UK , F rance, I taly and S pain, 108 of which underwent a buyout between 1997 and 2004. The results highlight that the sensitivity of investments to cash flows is increased when a buyout occurs, while investment levels do not seem to be affected after a buyout. However, differential effects emerge when considering the framework conditions in which investee firms operate and the typology and characteristics of investing funds.