Does ownership matter in private equity? The sources of variance in buyouts' performance

We study the impact of ownership on firm performance in an unexplored governance context: private equity (PE) firms and the buyouts in which they invest. We employ a multiple-membership, cross-classified, multilevel model on a unique database of 6,950 buyouts realized by 255 PE firms between 1973 and 2008 in 77 countries. The results document a significant PE firm effect (4.6%), the importance of which grows as time passes. We then study three contingencies that increase the importance of the PE firm effect: (1) value addition vs. selection strategies; (2) developed vs. emerging economies; and (3) economic downturns. Our findings shed new light on the sources of variance in buyouts' performance.