Social capital, syndication, and investment performance: evidence from PE investing in LBOs

Dahya, J. and Wu, B. (H.T.) (2024) Social capital, syndication, and investment performance: evidence from PE investing in LBOs. International Review of Financial Analysis, (doi: 10.1016/j.irfa.2024.103306) (In Press)

Abstract

This study examines the influence of social capital on leveraged buyout (LBO) investments. Exploiting proprietary global private equity data at the investment-level for leveraged buyouts, we find that alumni of Harvard's MBA program are more inclined to co-invest and form syndicates in LBO with each another. The phenomenon of Crimson pairing manifests in deals that involve uneven investments in co-investor capital, necessitating trust to alleviate agency costs and enabling investors to diversify their portfolios. The outcome of Crimson pairing is an increase in value and investment returns relative to all other typical LBO syndication partnerships.

• Item Type: Articles
• Additional Information: Support for this project was provided to Professor Jay Dahya by a PSC-CUNY Award # 61758- 00 49, jointly funded by The Professional Staff Congress and The City University of New York.
• Keywords: Social capital, trust, private equity, LBO syndication, performance.
• Status: In Press
• Refereed: Yes
• Glasgow Author(s) Enlighten ID: Wu, Dr Betty
• Authors: Dahya, J., and Wu, B. (H.T.)
• College/School: College of Social Sciences > Adam Smith Business School > Accounting and Finance
• Journal Name: International Review of Financial Analysis
• Publisher: Elsevier
• ISSN: 1057-5219
• ISSN (Online): 1873-8079
• Published Online: 18 April 2024
• Copyright Holders: Copyright © 2024 The Authors
• First Published: First published in International Review of Financial Analysis 2024
• Publisher Policy: Reproduced under a Creative Commons License