A0669
Title: Spillover effect of private equity investment: Evidence from Italy
Authors: Marzieh Abolhassani - Free University of Bozen-Bolzano (Netherlands) [presenting]
Jan Ditzen - Free University of Bozen-Bolzano (Italy)
Abstract: Private equity (PE) investments have emerged as a significant force in the financial landscape and global economy, influencing a wide array of industries and economic activities. Yet, the understanding of their economic implications is still limited. Spatial econometrics methods are applied to understand private equity spillover effects using novel panel data of 1,374 Italian PE-backed and matched control firms. Network models based on geography, industry and supply chain links are employed, as these networks can be important factors in the impact of private equity investment on target firm performance due to potential spillover. The hypothesis that a PE buyout in an industry will intensify the degree of competition in that industry with a negative effect on the performance of peers is tested. Additionally, PE buyouts are hypothesized to lead to a significant decline in productivity in the regions where the affected firms are located, due to localized disruptions in labor markets and supply chains. Results suggest, in essence, the significant negative effect of a PE buyout on firm productivity, indicating that the productivity decline has both regional and industry-wide repercussions, affecting a network of interconnected firms and regions beyond the initially impacted company.
