Short-termism in current financial capitalism. An extension to the private equity industry

Abstract

In a context of an increasingly focus of market participants on short-term results rather than on innovation or sustainability of the firm, we question its extension to a special case of the private context: the private equity industry. Opposite to other researchers that use expropriation and short-termism as equals, we dig into the narrow line that separates both terms. We theorize about the concept of short-termism, offering an alternative vision. In the second part of this project we use the financial statements of a sample of private equity buyouts in Spain from 2001 to 2011 to test five different scenarios (two of them corresponding to short-termism) and thus shed light into the impact of LBOs on the acquired firms’ performance. Results provide support on the presence of expropriation, in contrast with the arguments claimed by the private equity official narrative.