Quantitative Easing and Its Implications on Private Equity in the Euro Area
Abdullah Aryoubi, Marie Hildebrand, Michael Meser

In 2014, the European Central Bank implemented Quantitative Easing (QE), an unconventional policy measure comprising large-scale asset purchases that are intended to provide monetary stimulus to the economy when key interest rates are at the zero lower bound. Given its potential to restore the functioning of markets by promoting credit supply, QE comes with the risk that investors over-proportionally move toward riskier investments. We analyse whether the market for leveraged buyouts in connection with private equity – a market which is heavily affected by enhanced credit supply – delivers an indication for overheating. Presenting stylized facts, we find that QE is indeed associated with an elevated risk appetite of PE firms. However, QE also triggers PE firms to pursue operational improvement on companies they backed.

Full Text: PDF     DOI: 10.15640/jibe.v8n2a1