How Private Equity Enhances the Market for Corporate Control and Capitalism

In this age of firebrand political rhetoric and sniping from the right and the left, Wall Street has taken more than its fair share of criticism. One of the most significantly misplaced criticisms, however, derives from a gross misunderstanding of how the invisible hand of the market works and how certain mechanisms improve the health of firms and the market overall, delivering value for a broad swath of stakeholders—managers, investors, and employees alike.

In his 1965 “Mergers and the Market for Corporate Control,” Henry Manne describes how market competition helps regulate the behavior of managers. Managers that pursue objectives counter … Read more