Private equity and bank capital requirements: evidence from European firms

Lavery, P. , Spaliara, M.-E. and Tsoukas, S. (2023) Private equity and bank capital requirements: evidence from European firms. British Journal of Management, 34(1), pp. 390-409. (doi: 10.1111/1467-8551.12593)

Abstract

Using firm-level data from 16 euro-area countries over 2008-2014, we investigate how the performance of bank-affiliated private equity-backed companies evolves after the European Banking Authority (EBA) increases capital requirements for their parent banks. We find that portfolio companies connected to exposed banks reduce their level of investment and experience weaker asset growth, employment growth and profitability following the capital exercise. We further show that the effect is stronger for companies likely to face financial constraints. Finally, the findings indicate that the negative effect of the capital exercise is muted when the private equity sponsor is more experienced.

• Item Type: Articles
• Status: Published
• Refereed: Yes
• Glasgow Author(s) Enlighten ID: Lavery, Dr Paul and Spaliara, Professor Marina Eliza and Tsoukas, Professor Serafeim
• Authors: Lavery, P., Spaliara, M.-E., and Tsoukas, S.
• Subjects: H Social Sciences > HG Finance
• College/School: College of Social Sciences > Adam Smith Business School
• Journal Name: British Journal of Management
• Publisher: Wiley
• ISSN: 1045-3172
• ISSN (Online): 1467-8551
• Published Online: 08 February 2022
• Copyright Holders: Copyright © 2022 The Authors
• First Published: First published in British Journal of Management 34(1):390-409
• Publisher Policy: Reproduced under a Creative Commons License