I’ve written about the benefits of private equity’s “uncorporate” discipline, including owner exit rights and high-powered compensation, in reducing managerial agency costs in large firms. See my Partnership Governance of Large Firms and the longer version in Chapter 8 of my Rise of the Uncorporation.
Here’s some more evidence: Edgerton, Agency Problems in Public Firms: Evidence from Corporate Jets in Leveraged Buyouts. Here’s the abstract:
This paper uses rich, new data to examine the fleets of corporate jets operated by both publicly traded and privately held firms. In the cross-section, firms owned by private equity funds average jet fleets at least 40% smaller than observably similar publicly-traded firms. Similar fleet reductions are observed within firms that go private in leveraged buyouts. I discuss assumptions under which comparisons across and within firms provide estimates of lower and upper bounds on the average treatment effect of taking a firm from public to private in a leveraged buyout. Both censored and standard quantile regressions suggest that results at the mean are driven by firms in the upper 30% of the conditional jet distribution. Results thus suggest that executives in a substantial minority of public firms enjoy more generous perquisites than they would if subject to the pressures of private equity ownership.
