Private Equity Investments and the Productivity Puzzle
Advisor: Dr. Sara Boni
Type: Master's Thesis
Start: asap
Overview
Private equity (PE) has become one of the most influential asset classes, with buyouts reshaping entire sectors across Europe. Yet, despite the growing role of PE in capital reallocation and firm restructuring, its real economic effects remain only partially understood.
Recent empirical evidence suggests that PE-backed firms often experience short-term declines in total factor productivity (TFP) following acquisition, driven by rapid expansions in capital and labor inputs that outpace output growth. However, the magnitude and persistence of these effects appear to vary widely across countries, sectors, and deal types. This heterogeneity raises fundamental questions about how institutional, financial, and regulatory environments mediate the relationship between PE ownership and firm performance.
This thesis aims to revisit the so-called “productivity puzzle” of private equity ownership by placing cross-country heterogeneity at the center of the analysis. Using a large dataset of European PE buyouts, the project will investigate how differences in national business environments—such as labor market flexibility, financial development, and governance structures—affect post-buyout productivity trajectories.
Beyond measuring aggregate effects, the project seeks to identify the structural and institutional drivers of divergent outcomes, offering new insights into why PE ownership may foster efficiency in some contexts but appear less effective in others. The findings will contribute to the broader debate on the real economic consequences of financial ownership and the role of PE in shaping productivity dynamics across Europe’s diverse economies.
Objective
- Motivation and Research Question
- While private equity plays a critical role in modern financial markets, its effects on the real economy remain ambiguous. The existing literature has documented both efficiency gains and productivity slowdowns following PE acquisitions, but evidence across Europe is mixed. This thesis will reassess the productivity implications of PE ownership by explicitly accounting for institutional and cross-country variation.
- While private equity plays a critical role in modern financial markets, its effects on the real economy remain ambiguous. The existing literature has documented both efficiency gains and productivity slowdowns following PE acquisitions, but evidence across Europe is mixed. This thesis will reassess the productivity implications of PE ownership by explicitly accounting for institutional and cross-country variation.
- Core Research Questions
- How does private equity ownership affect firm-level productivity across European countries?
- What role do country-level characteristics, such as labor market regulations, investor protection, and financial depth, play in shaping these effects?
- Are productivity responses to PE buyouts consistent across industries and deal types, or do they reveal distinct strategic patterns?
Work extensively on a compelling storyline and narrative
Methodology
The thesis will employ an empirical strategy combining difference-in-differences and event-study techniques, adapted to a cross-country comparative framework.
Key components include:
- Data integration from Preqin (deal-level PE information) and Bureau van Dijk’s Orbis (firm-level financials).
- Measurement of Total Factor Productivity (TFP) using a Cobb–Douglas production function.
- Estimation of treatment effects of PE ownership on TFP, output, and inputs (labor and capital) relative to matched control firms.
- Incorporation of country-level institutional variables to explain heterogeneity in outcomes.
- Robustness checks with alternative productivity measures and deal classifications.
Expected Contribution
This project will:
- Shift the analytical focus from aggregate post-buyout effects to cross-country heterogeneity, uncovering how local institutional settings mediate PE outcomes.
- Provide empirical evidence on how financial ownership interacts with real economy mechanisms across European markets.
- Offer a comparative framework for understanding the productivity dynamics of PE-backed firms.
- Strengthen the link between financial economics and industrial organization perspectives on ownership and efficiency.
Requirements
- Interest in private equity, productivity, and cross-country comparative analysis.
- Background in econometrics and applied financial economics.
- Strong data management and programming skills (Python or MATLAB).
- Motivation for empirical research using large-scale firm-level data.
Suggested Literature
- Biesinger, M., Bircan, C., & Ljungqvist, A. (2020). Value Creation in Private Equity.
- Boni, S., & Schneider, A. (2025). Private Equity and Productivity: Evidence from Europe.
- Coricelli, F., Driffield, N., Pal, S., & Roland, I. (2012). When Does Leverage Hurt Productivity Growth? Journal of Financial Stability.
- Davis, S. J., Haltiwanger, J., Jarmin, R., Lerner, J., & Miranda, J. (2014). Private Equity, Jobs, and Productivity. American Economic Review, 104(12): 3956–3990.
- Phalippou, L., & Morris, T. (2020). An Inconvenient Fact: Private Equity Returns & the Billionaire Factory. Journal of Applied Corporate Finance.
- Stromberg, P. (2009). The Economic and Social Impact of Private Equity in Europe.
Contact & Application
If you are interested in writing your thesis on this topic, please indicate this in your application. Please note that this topic can be expanded and/or taken in other directions depending on the student's own interests and ideas.