The (Heterogenous) Economic Effects of Private Equity Buyouts: A Comment

Abstract

Davis, Haltiwanger, Handley, Lerner, Lipsius, and Miranda (2021) continue to produce ex- tensions to the Davis, Haltiwanger, Handley, Jarmin, Lerner, and Miranda (2014) collection without addressing the critical research design issues raised in Ayash and Rastad (2017), Ayash and Rastad (2018) and Ayash and Rastad (2019b). Every error in Davis et al. (2014) and Davis, Haltiwanger, Handley, Lerner, Lipsius, and Miranda (2019) is carried over into their manuscript with a new title. First and foremost, the authors misrepresent their sample as specific to lever- aged buyouts; it is not. We clearly illustrates this fact. Policy makers do not have an issue with venture capital and growth equity buyouts giving piles of cash to firms they acquire because of the subsequent investment in R&D, innovation, jobs and physical capital. However, policy makers cannot learn about the subject of interest, controversial leveraged buyouts, when these make up such a small portion of the sample tested in Davis et al. collection (Davis, Haltiwanger, Jarmin, Lerner, and Miranda, 2008 and Davis, Haltiwanger, Jarmin, Lerner, and Miranda, 2011 focus on employment, Davis, Haltiwanger, Jarmin, Lerner, and Miranda, 2009 presented at the World Economic Forum introduces productivity to the analysis, Davis, Haltiwanger, Handley, Jarmin, Lerner, and Miranda, 2013 brings it all together, and the final published version is Davis et al., 2014. Davis et al. (2019) is basically identical to Davis et al. (2021)). Unfortunately, these authors continue to obfuscate our understanding of the (heterogeneous) economic effects of these complex transactions due to the fact that they cannot observe leverage; they treat all buyouts as equivalent to leveraged buyouts. We therefore gladly reiterate our analysis to bring light to these researchers who have been in the dark for more than a decade.