Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/87057
Authors: 
Lopez-de-Silanes, Florencio
Phalippou, Ludovic
Gottschalg, Oliver
Year of Publication: 
2011
Series/Report no.: 
Tinbergen Institute Discussion Paper 11-035/2/DSF12
Abstract: 
We examine the determinants of private equity returns using a newly constructed database of 7,500investments worldwide over forty years. The median investment IRR (PME) is 21% (1.3), gross offees. One in ten investments goes bankrupt, whereas one in four has an IRR above 50%. Only one ineight investments is held for less than 2 years, but such investments have the highest returns. Thescale of private equity firms is a significant driver of returns: investments held at times of a highnumber of simultaneous investments underperform substantially. The median IRR is 36% in thelowest scale decile and 16% in the highest. Results survive robustness tests. Diseconomies of scaleare linked to firm structure: independent firms, less hierarchical firms, and those with managers ofsimilar professional backgrounds exhibit smaller diseconomies of scale.
Subjects: 
private equity
diseconomies of scale
JEL: 
G24
Document Type: 
Working Paper

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