Deregulation of the financial markets and investor thirst for higher profits have given an enormous boost to private equity financiers. They buy companies, issue huge debt, and reconfigure or dismantle them for profitable returns, sometimes at the expense of workers, suppliers, customers, and creditors. Yet because they are not publicly owned, private equity firms have little transparency or accountability. Economic scholars Appelbaum and Batt shine some light on the shadowy world of private equity and its high risk-reward profile. They clearly explain how private equity investments differ from publicly traded companies and explore their impact on the broader U.S. economy, particularly because so many pension funds are investors in private equity deals. They explore the impact of private equity deals on the labor market as more and more acquired companies are encouraged to reduce their workforces to give greater return to investors. Finally, Appelbaum and Batt recommend changes in public policy to reduce incentives that overburden companies with debt and to promote greater transparency in such deals. A dense but accessible look at a little-understood sector of the financial markets. --Vanessa Bush
About the Author
EILEEN APPELBAUM is senior economist at the Center for Economic and Policy Research, Washington, D.C. and Visiting Professor in the Management Department, University of Leicester, UK. ROSEMARY BATT is the Alice Hanson Cook Professor of Women and Work at the Industrial and Labor Relations School, Cornell University.