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An agency theoretic analysis of value creation through management buy-outs of family firms

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Author Info

  • Chrisman, James J.
  • Chua, Jess H.
  • Steier, Lloyd P.
  • Wright, Mike
  • McKee, D’Lisa N.

Abstract

Family firms without able and willing family successors are frequently sold to non-family managers through management buy-outs (MBOs). Whether MBOs create value is thought to be dependent upon the ability to reduce owner–manager agency costs. In this article we examine the agency costs of MBOs that acquire family firms. We contribute to theory by arguing that in such situations, value creation by reducing agency costs will depend upon pre-MBO agency costs, the ability to solve the double agency problem, and the relationship between the cost of agency control mechanisms and the residual losses from opportunism before and after the MBO.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Family Business Strategy.

Volume (Year): 3 (2012)
Issue (Month): 4 ()
Pages: 197-206

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Handle: RePEc:eee:fambus:v:3:y:2012:i:4:p:197-206

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Related research

Keywords: Agency theory; Family business; Management buy-outs;

References

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