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Leverage

Due to high leverage, the risk of private equity-backed firms defaulting on their loans is a source of concern and has raised questions regarding its impact on the stability and survival of these companies. 

However, leverage can also be used to significantly boost the returns gained from an investment, allowing the private equity firm to hold an even greater equity share of the portfolio company, thereby allowing them to capture far higher total returns.

The papers in this section outline the key arguments surrounding the use of leverage and financial engineering in private equity.

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