Private Equity and Portfolio Companies: Lessons from the Global Financial Crisis

Does private equity contribute to financial fragility during economic crises? As discussed at length in the article at the top of this issue, there is extensive literature that explores the effects of private equity ownership on corporate productivity, product quality, employment, and related dimensions during normal times. In general, the picture painted by these studies is one in which PE sponsors have a mixed impact on the companies in which they invest: while the firms do well on productivity and a variety of other operational metrics, employee headcounts shrink and wages suffer.(1)