Private Equity Investments in Banks

The authors investigate the performance change of 109 global banks that received private equity investments between 2000 and 2012. The investee banks experience significant improvements in operating profitability mainly due to increases in customer loans and the implementation of cost-cutting policies. Changes in leverage are not significant and have a very limited impact on banks’ performance post-investment. The increase in profitability is positively associated with the size of the acquired stake, suggesting that the larger the influence of the private equity fund on the target bank, the more effective the operating improvements.