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Illegal buyouts

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  • Cumming, Douglas
  • Zambelli, Simona

Abstract

This study empirically examines the effects of a regulation change on the structure and governance of leveraged buyouts (LBOs) within the Italian private equity market, whose transactions were only recently legalized. With a new data set covering approximately 85% of the buyout funds active in Italy during the period of 1999-2006, we find that a regulation that prohibits LBOs can reduce their frequency, but does not exclude them altogether. Rather, it inhibits efficient governance and distorts decision making. Overall, the data are consistent with the view that laws prohibiting LBOs result in less efficient LBO arrangements.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Banking & Finance.

Volume (Year): 34 (2010)
Issue (Month): 2 (February)
Pages: 441-456

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Handle: RePEc:eee:jbfina:v:34:y:2010:i:2:p:441-456

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Web page: http://www.elsevier.com/locate/jbf

Related research

Keywords: Buyouts Regulation Governance Law and finance;

References

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  1. Richard Harris & Donald S. Siegel & Mike Wright, 2003. "Assessing the Impact of Management Buyouts on Economic Efficiency: Plant-Level Evidence from the United Kingdom," Rensselaer Working Papers in Economics 0304, Rensselaer Polytechnic Institute, Department of Economics.
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Citations

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Cited by:
  1. Patricia Crifo & Vanina Forget, 2013. "Think Global, Invest Responsible: Why the Private Equity Industry Goes Green," Journal of Business Ethics, Springer, vol. 116(1), pages 21-48, August.
  2. Valkama, Petri & Maula, Markku & Nikoskelainen, Erkki & Wright, Mike, 2013. "Drivers of holding period firm-level returns in private equity-backed buyouts," Journal of Banking & Finance, Elsevier, vol. 37(7), pages 2378-2391.
  3. Cumming, Douglas & Zambelli, Simona, 2013. "Private equity performance under extreme regulation," Journal of Banking & Finance, Elsevier, vol. 37(5), pages 1508-1523.
  4. Humphery-Jenner, Mark & Suchard, Jo-Ann, 2013. "Foreign VCs and venture success: Evidence from China," Journal of Corporate Finance, Elsevier, vol. 21(C), pages 16-35.
  5. Groh, Alexander Peter & Gottschalg, Oliver, 2011. "The effect of leverage on the cost of capital of US buyouts," Journal of Banking & Finance, Elsevier, vol. 35(8), pages 2099-2110, August.
  6. Ughetto, Elisa, 2010. "Assessing the contribution to innovation of private equity investors: A study on European buyouts," Research Policy, Elsevier, vol. 39(1), pages 126-140, February.

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