NYU Study Shows Republican States Fare Better In Buyouts
This story was written by Kelly Roberts, Washington Square News
Republican views are good for business, a new Stern study has found.
Stern visiting assistant professor of management Aviad Peer, along with Oliver Gottschalg of HEC School of Management in Paris, found that companies in red states have better results in buyouts. A buyout is when companies buy other firms, rearrange and streamline the management then sell them for a profit.
Peer and Gottschalgs research analyzed 5,870 different buyouts by private equity firms from 1980 to 2003. They used the presidential election results between 1988 and 2004 to average the political tendencies of the state.
Their studies concluded that companies in the red states are 10 percent more likely to be bought out.
Peer believes this is because companies in red states generally have a fewer people in charge, which makes them more streamlined.
Peer does not believe that President-elect Barack Obamas presidency will have a big effect on the number of buyouts but said that the financial crisis creates greatly profitable opportunities for buyouts, Peer said.
We are in a situation with something else that hasnt happened for 20 to 30 years. We believe that the financial crisis by itself creates huge opportunities, Peer said.
But these opportunities will not include increased job opportunities for Stern graduates, he said.
Buyout funds are very, very small. They are not hiring people, generally speaking, right after business school. They are looking for specific experiences or specific contacts a person might have, Peer said.
With the economic crisis, many Stern students are concerned this will mean even fewer job opportunities, which will be compounded with rising school costs.
Im a finance major; Im extremely worried about jobs. There [are] going to be more mergers and acquisitions soon, Stern graduate student Amanda Chen said. Im worried that by the time I graduate theres not going to be enough banks left out there to hire me.
While political views are not the only factor in successful buyouts, Peer predicts that continued economic troubles will lead to even greater buyout activity in red states in the coming years.