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The effects of private equity and venture capital on sales and employment growth in small and medium-sized businesses

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  • Paglia, John K.
  • Harjoto, Maretno A.

Abstract

We study the effects private equity (PE) and venture capital (VC) financing have on small and mid-sized single entity business establishments from 1995 to 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.

Suggested Citation

  • Paglia, John K. & Harjoto, Maretno A., 2014. "The effects of private equity and venture capital on sales and employment growth in small and medium-sized businesses," Journal of Banking & Finance, Elsevier, vol. 47(C), pages 177-197.
    • Handle: RePEc:eee:jbfina:v:47:y:2014:i:c:p:177-197
    DOI: 10.1016/j.jbankfin.2014.06.023
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    More about this item

    Keywords

    Private equity; Venture capital; Growth; Employment; Sales;
    All these keywords.

    JEL classification:

    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J15 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Minorities, Races, Indigenous Peoples, and Immigrants; Non-labor Discrimination
    • J16 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Gender; Non-labor Discrimination
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance

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