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Buyout Activity: The Impact of Aggregate Discount Rates / Valentin Haddad, Erik Loualiche, Matthew Plosser.
- Format:
- Book
- Author/Creator:
- Haddad, Valentin.
- Series:
- Working Paper Series (National Bureau of Economic Research) no. w22414.
- NBER working paper series no. w22414
- Language:
- English
- Physical Description:
- 1 online resource: illustrations (black and white);
- Other Title:
- Buyout Activity
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 2016.
- Summary:
- Buyout booms form in response to declines in the aggregate risk premium. We document that the equity risk premium is the primary determinant of buyout activity rather than credit-specific conditions. We articulate a simple explanation for this phenomenon: a low risk premium increases the present value of performance gains and decreases the cost of holding an illiquid investment. A panel of U.S. buyouts confirms this view. The risk premium shapes changes in buyout characteristics over the cycle, including their riskiness, leverage, and performance. Our results underscore the importance of the risk premium in corporate finance decisions.
- Notes:
- Print version record
- July 2016.
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