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Private Equity and Financial Fragility During the Crisis

Jul 2017
Working Paper
17-021
By  Shai Bernstein, Josh Lerner, Filippo Mezzanotti
Do private equity firms contribute to financial fragility during economic crises? We find that
during the 2008 financial crisis, PE-backed companies increased investments relative to their
peers, while also experiencing greater equity and debt inflows. The effects are stronger among
financially constrained companies and those whose private equity investors had more resources at
the onset of the crisis. PE-backed companies consequentially experienced higher asset growth and
increased market share during the crisis.