Does culture affect the performance of private equity buyouts?

Abstract

GLOBE is the acronym for "Global Leadership and Organizational Behavior Effectiveness," a 62nation, 11-year study involving 170 researchers worldwide. The GLOBE Project was introduced in my first article (click here). In this third article, I will overview GLOBE's findings about how business values and practices vary across nations and cultures. Cultural Dimensions, the Measuring Rods of Cross-Cultural Research As I explained in my first article, the first major question addressed by the GLOBE researchers was which measurement standards to use so that they could be precise about the similarities and differences among numerous societal and organizational cultures. After a thoroughgoing literature review as well as two pilot studies, the team identified nine "cultural dimensions" that would serve as their units of measurement, or (in research language) "independent variables." Cultural dimensions have been around as long as the field of intercultural research (i.e., since the early 1960s). They provide concepts and terminology that enable all of us to become aware of, to measure, and to talk knowledgeably about the values and practices found in a human culture-and about the similarities and differences among human cultures. What exactly is a cultural dimension? It's a concept that is depicted graphically as a continuum. In most cases, only the two ends of the continuum are named. Here, graphically, is one of the cultural dimensions actually used by the GLOBE research team.

Cross-border buyout pricing

“…BvD data is frequently used in the PE literature, especially when portfolio firm accounting data is required as it is the case in our study (e.g., Bernstein et al 2019;Rigamonti et al 2016; Tykvova and Borell 2012). We employ a similar sampling strategy as in Hammer et al (2017) and Hammer et al (2018) and select all institutional buyouts between 1 January 1997 and 31 December 2010 where deal financing is labelled as "private equity" or "leveraged buyout". We exclude venture capital, expansion capital, uncompleted deals and pure management buyouts without PE firm involvement.…”

“…This variable is used as an interaction term with cross-border to test for H4. To control for firm's financing environment at the time of the buyout, we collect data on option-adjusted high-yield spreads following Hammer et al (2018). This is important because financing conditions at entry are correlated with buyout pricing (Axelson et al 2013).…”

Do employees’ generational cohorts influence corporate venturing? A multilevel analysis

“…Therefore, the use of traditional plots to illustrate interactions represented a complex challenge. Inspired by published studies with complex models in fields such as medicine (Elgendy et al 2019), sociology (Mize 2019) and business (Hammer et al 2018), we used the Stata spotlight for creating graphs to visualize our interactions and solve our complexity. According to Huber (2017), the Stata spotlight helps to visualize continuous by continuous interactions with margins and two-way contours.…”

“…*Methodological note: These graphs were created using Stata spotlight that helps to visualize continuous by continuous interactions with margins and two-way contours. For further details about how to compute and interpret the Stata spotlight, please review the Stata commands developed by Huber (2017), as well as published studies from multiple fields that have used the Stata spotlight for explaining models with complex interactions (see Hammer et al 2018;Elgendy et al 2019;Mize 2019) Publisher's note Springer Nature remains neutral with regard to jurisdictional claims in published maps and institutional affiliations.…”

The More the Merrier? Diversity and Private Equity Performance

“…First, the lead partner teams (LPTs) combine the job elements of a top management team (TMT), as they are involved in strategic decision‐making, with a supervisory board, as they closely monitor management (Metrick and Yasuda, 2011). Second, LPTs have powerful incentives to maximize their portfolio company's value within a short holding period since large parts of compensation are tied to deal performance (Hammer, Hinrichs and Schwetzler, 2018). This creates ample channels for the diffusion of LPT characteristics to everyday decision‐making at a portfolio firm level.…”