Paying for performance in private equity: Evidence from venture capital partnerships
Publication
, Journal Article
Höther, N; Robinson, DT; Sievers, S; Hartmann-Wendelse, T
Published in: Management Science
January 1, 2020
We offer the first empirical analysis connecting the timing of general partner (GP) compensation to private equity fund performance. Using detailed information on limited partnership agreements between private equity limited and general partners, we find that "GP-friendly" contracts-agreements that pay general partners on a deal-by-deal basis instead of withholding carried interest until a benchmark return has been earned- are associated with higher returns, both gross and net of fees. This is robust to measures of performance persistence, time period effects, and other contract terms and is related to exittiming incentives. Timing practices balance GP incentives against limited partner downside protection.
Duke Scholars
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Published In
Management Science
DOI
EISSN
1526-5501
ISSN
0025-1909
Publication Date
January 1, 2020
Volume
66
Issue
4
Start / End Page
1756 / 1782
Related Subject Headings
- Operations Research
- 46 Information and computing sciences
- 38 Economics
- 35 Commerce, management, tourism and services
- 15 Commerce, Management, Tourism and Services
- 08 Information and Computing Sciences
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Höther, N., Robinson, D. T., Sievers, S., & Hartmann-Wendelse, T. (2020). Paying for performance in private equity: Evidence from venture capital partnerships. Management Science, 66(4), 1756–1782. https://doi.org/10.1287/mnsc.2018.3274
Höther, N., D. T. Robinson, S. Sievers, and T. Hartmann-Wendelse. “Paying for performance in private equity: Evidence from venture capital partnerships.” Management Science 66, no. 4 (January 1, 2020): 1756–82. https://doi.org/10.1287/mnsc.2018.3274.
Höther N, Robinson DT, Sievers S, Hartmann-Wendelse T. Paying for performance in private equity: Evidence from venture capital partnerships. Management Science. 2020 Jan 1;66(4):1756–82.
Höther, N., et al. “Paying for performance in private equity: Evidence from venture capital partnerships.” Management Science, vol. 66, no. 4, Jan. 2020, pp. 1756–82. Scopus, doi:10.1287/mnsc.2018.3274.
Höther N, Robinson DT, Sievers S, Hartmann-Wendelse T. Paying for performance in private equity: Evidence from venture capital partnerships. Management Science. 2020 Jan 1;66(4):1756–1782.
Published In
Management Science
DOI
EISSN
1526-5501
ISSN
0025-1909
Publication Date
January 1, 2020
Volume
66
Issue
4
Start / End Page
1756 / 1782
Related Subject Headings
- Operations Research
- 46 Information and computing sciences
- 38 Economics
- 35 Commerce, management, tourism and services
- 15 Commerce, Management, Tourism and Services
- 08 Information and Computing Sciences