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Global Multidisciplinary Journal

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Eclipses, Leverage, And Long-Term Value: A Comprehensive Reassessment Of Private Equity, Leveraged Buyouts, And Financial Distress In Modern Capitalism

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Rahul Sen 1 ,
4 Department of Finance and Strategic Management, University of Cape Town, South Africa

Abstract

The transformation of modern capitalism over the past four decades has been deeply shaped by the rise of private equity and the widespread use of leveraged buyouts as mechanisms of corporate control, governance, and restructuring. This article undertakes an extensive, theory-driven and empirically grounded reassessment of private equity and leveraged buyouts, drawing strictly and exclusively on the established academic and policy-oriented literature provided in the reference list. Building on foundational arguments concerning the eclipse of the public corporation and the reallocation of control rights, the article synthesizes insights from finance, law, organizational theory, and political economy to examine whether private equity ownership enhances operating performance, innovation, and long-term value creation or instead amplifies financial fragility, systemic risk, and social costs. Particular attention is devoted to management buyouts, debt structures, bankruptcy dynamics, and the resolution of financial distress, as well as to the evolving use of contractual tools such as payment-in-kind amendments and prepackaged bankruptcies. The article also integrates evidence on sectoral spillovers, including banking stability and health outcomes, and contextualizes emblematic corporate failures within broader structural trends. By elaborating theoretical mechanisms in detail, addressing counter-arguments, and highlighting unresolved tensions, this study contributes a unified analytical framework that reconciles seemingly contradictory findings in the literature. The article concludes that private equity cannot be evaluated as a monolithic governance form; instead, its economic and social consequences depend critically on leverage intensity, time horizons, legal regimes, and incentive alignment. The findings underscore the need for more nuanced regulatory, contractual, and analytical approaches to assessing private equity’s role in contemporary capitalism.

Keywords

Private equity, leveraged buyouts, corporate governance

References

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How to Cite

Rahul Sen. (2026). Eclipses, Leverage, And Long-Term Value: A Comprehensive Reassessment Of Private Equity, Leveraged Buyouts, And Financial Distress In Modern Capitalism. Global Multidisciplinary Journal, 5(01), 1-7. https://www.grpublishing.org/journals/index.php/gmj/article/view/263

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