Two million products across 1,100 product categories covering more than 50 percent of total sales at grocery and drug stores and more than 30 percent of sales at mass merchandisers (e.g., Target, Walmart) from 2006 to 2014: That's the sample size of data professor of finance Al Sheen and his coauthors analyzed to understand the impact of private equity on consumers.

Once known as corporate raiders, private equity firms are essentially like house flippers: They are bargain hunters buying businesses they consider to be undervalued, fixing them up, and eventually selling them for a profit.

The New York Times published a multipart exploration of private equity in 2016, detailing how private equity firms own a significant number of the businesses and products we come into contact with daily—everything from coffee to healthcare and construction companies. The impact of private equity on consumers and our daily lives, however, is unclear. That is, relatively little large-scale research has been done on the impact of private equity on consumers.

Sheen and his coauthors set out to remedy this with their large scale study. Specifically, they wanted to know if prices on consumer goods rose after a company or product was sold to a private equity firm. Their findings are summarized in their latest working paper titled "Barbarians at the Shelf? Private Equity, Products, and Consumers," which is now in process of being submitted and reviewed for publication.

"The common narrative is that private equity comes in and burdens a company with debt, cuts costs, fires employees, and increases prices," Sheen explained. "We wanted to find out if the data supported these claims, or if something else was going on."

What the researchers found is that private equity raise prices only marginally—less than 1 percent—on existing products relative to matched control firms. The data also revealed that sales figures for acquired companies typically climbed by more than 40 percent as a result of private equity.

Thus, instead of being a detriment to customers, the data suggest that private equity can be beneficial, providing more product choice and wider distribution of products. That is, private equity-backed companies innovated more—introducing more products onto shelves than their competitors. In addition, they increased the availability of products by getting them into more stores. Combined, both these advances made it easier for consumers to buy the products, leading to a corresponding climb in sales figures.

"Rather than seeking to squeeze every last dollar out of a company through cost cutting and layoffs, in many instances, private equity strategies realize value by increasing sales through greater geographic distribution and expanding product lines," Sheen said.

Sheen and authors posit that this expansion is possible because private equity firms can bring expertise in optimizing supply chains and business strategies, as well as market contacts and access to banks and private debt financing. For example, a private equity firm may already have established in-roads and contacts to get a new product into Costco.

Of note, however, the market expansion and product diversity resulting from private equity only appeared to apply to privately-owned companies that were then acquired by private equity firms. If a publicly traded firm went private through a private equity buyout, the results diverged. In fact, the data revealed that for former public firms, units sold and sales figures declined instead of increased.

The authors explain that this discrepancy could be the result of public firms overinvesting or expanding into new markets and product lines too rapidly. Private equity, in essence, may be helping former public firms to become more profitable by refocusing resources on core business competencies and markets. This explanation is in line with findings from other research.

In all, despite some differences between private and public buyouts, Sheen said the narrative that private equity firms raise prices is not supported by the data. These results, however, only apply to consumer goods, and the findings may not hold up in more constrained (i.e., monopolistic) markets, such as pharmaceuticals, in which a company can have the sole patent for a product. Yet, at the same time, perhaps innovation driven by private equity could help mitigate market concentration within an industry. Those questions are, of course, topics or further research.