According to a study conducted by World Economic Forum, PE firms are significantly better managed than government-owned, family-owned and privately owned firms. This is true even after controlling for a range of other firm characteristics such as country,industry, size and employee skills.
However, the difference in management practice scores between PE and dispersed shareholding firms including publicly quoted firms is small and insignificant. Second, the reason for the high average levels of management practices in PE firms is the lack of any tail of badly managed firms under their ownership” added Nicholas Bloom from Standford University and some of the editors.
While government-owned, family-owned and privately owned firms have substantial tails of badly managed firms, those owned by private equity are all consistently well managed.
Finally, PE-owned firms are particularly strong at operations management practices, such as the adoption of modern lean manufacturing practices, using continuous improvements and a comprehensive performance documentation process.
As such, this suggests PE ownership is associated with broad-based improvements across a wide range of management practices rather than simply just stronger performance incentives.
