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Managing Margins: PE Effects on Financial, Physical, and Human Capital

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Listed:
  • Michael R. Richards
  • Maggie Shi
  • Christopher M. Whaley

Abstract

Private equity (PE) plays an increasingly important role in the modern US economy. However, its impacts on owned-firms are incompletely understood. We exploit a historically large leveraged buyout of a national hospital chain to examine how the full life cycle of PE influences hospital-level revenues, technology sourcing, labor use, and financial performance. We find permanent improvements in hospital volumes and revenues. PE also reduces growth in full-time employees, with a suggestive partial substitution toward part-time workers. Technology adoption is restrained, but the number of vendors expands. Overall, PE has nuanced effects on hospital management, which translate to improved operating margins.

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  • Michael R. Richards & Maggie Shi & Christopher M. Whaley, 2024. "Managing Margins: PE Effects on Financial, Physical, and Human Capital," NBER Working Papers 32840, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:32840
    Note: EH
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    More about this item

    JEL classification:

    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
    • L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General
    • L24 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Contracting Out; Joint Ventures

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