HEC Paris

About: HEC Paris is a education organization based out in Jouy-en-Josas, France. It is known for research contribution in the topics: Market liquidity & Entrepreneurship. The organization has 584 authors who have published 2756 publications receiving 104467 citations. The organization is also known as: Ecole des Hautes Etudes Commerciales & HEC School of Management Paris.

Performance of Private Equity Funds

Abstract: Using a dataset of 1328 mature private equity funds, we find that performance estimates found in previous research and used as industry benchmark are overstated. We show that in commonly used samples, accounting values reported by mature funds for non-exited investments are substantial and we provide evidence that these mostly represent living dead investments. We also document a bias towards better performing funds in these data. After correcting for sample bias and overstated accounting values, average fund performance changes from a slight overperformance to a substantial underperformance of 3% per year with respect to the S&P 500. Assuming a typical fee structure, we find that gross-of-fees these funds outperform by 3% per year. We conclude that the stunning growth in the amount allocated to this asset class cannot be attributed to genuinely high past net performance. We discuss several potentially misleading aspects of standard performance reporting and discuss some of the added benefits of investing in private equity funds as a first step towards an explanation for our results.

Financial Contracting with Optimistic Entrepreneurs

Abstract: Optimistic beliefs are a source of nonpecuniary benefits for entrepreneurs that can explain the "Private Equity Puzzle." This paper looks at the effects of entrepreneurial optimism on financial contracting. When the contract space is restricted to debt, we show the existence of a separating equilibrium in which optimists self-select into short-term debt and realists into long-term debt. Long-term debt is optimal for a realist entrepreneur as it smooths payoffs across states of nature. Short-term debt is optimal for optimists for two reasons: (i) "bridging the gap in beliefs" by letting the entrepreneur take a bet on his project's success, and (ii) letting the investor impose adaptation decisions in bad states. We test our theory on a large data set of French entrepreneurs. First, in agreement with the psychology literature, we find that biases in beliefs may be (partly) explained by individual characteristics and tend to persist over time. Second, as predicted by our model, we find that short-term debt is robustly correlated with "optimistic" expectation errors, even controlling for firm risk and other potential determinants of short-term leverage.

Research on information systems failures and successes: Status update and future directions

Abstract: Information systems success and failure are among the most prominent streams in IS research. Explanations of why some IS fulfill their expectations, whereas others fail, are complex and multi-factorial. Despite the efforts to understand the underlying factors, the IS failure rate remains stubbornly high. A Panel session was held at the IFIP Working Group 8.6 conference in Bangalore in 2013 which forms the subject of this Special Issue. Its aim was to reflect on the need for new perspectives and research directions, to provide insights and further guidance for managers on factors enabling IS success and avoiding IS failure. Several key issues emerged, such as the need to study problems from multiple perspectives, to move beyond narrow considerations of the IT artifact, and to venture into underexplored organizational contexts, such as the public sector.