private equity; venture capital; growth; employment; sales
We study the effects private equity (PE) and venture capital (VC) financing have on small and mid-sized single entity business establishments from 1995-2009. We focus on single entity establishments to cleanly examine the impact of PE and VC financing on establishments’ organic growth. This study reveals that PE and VC financing have positive impacts on single entity business establishments’ net sales and employment growth. The impact of PE financing on establishments’ growth is slower and smaller than VC financing. However, we find that the benefit of PE financing lasts longer than VC financing. We also find that ethnic minority, female, and foreign business owners are less likely to receive PE and VC financing. Finally, we find evidence that although establishments with government contracts are more likely to receive PE and VC financing, those contracts fail to produce marginal post-funding growth and employment benefits.
Journal of Banking and Finance
Paglia, J. K., & Harjoto, M. A. (2014). The effects of private equity and venture capital on sales and employment growth in small and medium-sized businesses. Journal of Banking and Finance, 47(1), 177-197. doi:10.1016/j.jbankfin.2014.06.023