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Interest alignment and firm performance

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  • Gottschalg, Oliver

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  • Meier, Degenhard
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    Abstract

    This study derives testable hypotheses from their framework and thus provides an empirical test of interest alignment theory based on a sample of 69 management buyouts in the UK. The results of the multivariate regression model suggest that in this setting, interest alignment does have a significant influence on firm performance.

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    File URL: http://www.hec.fr/var/fre/storage/original/application/2cfdd0201ea70b20ce868cd6a0b7c7d2.pdf
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    Bibliographic Info

    Paper provided by HEC Paris in its series Les Cahiers de Recherche with number 825.

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    Length: 25 pages
    Date of creation: 01 Jan 2005
    Date of revision:
    Handle: RePEc:ebg:heccah:0825

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    Postal: HEC Paris, 78351 Jouy-en-Josas cedex, France
    Web page: http://www.hec.fr/
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    Related research

    Keywords: competitive advantage; interest alignment; motivation; buyouts;

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    References

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    1. Cotter, James F. & Peck, Sarah W., 2001. "The structure of debt and active equity investors: The case of the buyout specialist," Journal of Financial Economics, Elsevier, Elsevier, vol. 59(1), pages 101-147, January.
    2. Kaplan, Steven, 1989. "The effects of management buyouts on operating performance and value," Journal of Financial Economics, Elsevier, Elsevier, vol. 24(2), pages 217-254.
    3. Ludovic Phalippou & Oliver Gottschalg, 2009. "The Performance of Private Equity Funds," Review of Financial Studies, Society for Financial Studies, Society for Financial Studies, vol. 22(4), pages 1747-1776, April.
    4. Armen A. Alchian & Harold Demsetz, 1971. "Production, Information Costs and Economic Organizations," UCLA Economics Working Papers, UCLA Department of Economics 10A, UCLA Department of Economics.
    5. Gottschalg, Oliver & Berg, Achim, 2005. "Understanding value generation in buyouts," Les Cahiers de Recherche, HEC Paris 824, HEC Paris.
    6. Frey, Bruno S & Jegen, Reto, 2001. " Motivation Crowding Theory," Journal of Economic Surveys, Wiley Blackwell, Wiley Blackwell, vol. 15(5), pages 589-611, December.
    7. Kreps, David M, 1997. "Intrinsic Motivation and Extrinsic Incentives," American Economic Review, American Economic Association, American Economic Association, vol. 87(2), pages 359-64, May.
    8. Smith, Abbie J., 1990. "Corporate ownership structure and performance *1: The case of management buyouts," Journal of Financial Economics, Elsevier, Elsevier, vol. 27(1), pages 143-164, September.
    9. Jay B. Barney, 1986. "Strategic Factor Markets: Expectations, Luck, and Business Strategy," Management Science, INFORMS, INFORMS, vol. 32(10), pages 1231-1241, October.
    10. Jensen, Michael C. & Meckling, William H., 1976. "Theory of the firm: Managerial behavior, agency costs and ownership structure," Journal of Financial Economics, Elsevier, Elsevier, vol. 3(4), pages 305-360, October.
    11. Lindenberg, Siegwart, 2001. "Intrinsic Motivation in a New Light," Kyklos, Wiley Blackwell, Wiley Blackwell, vol. 54(2-3), pages 317-42.
    12. Canice Prendergast, 1999. "The Provision of Incentives in Firms," Journal of Economic Literature, American Economic Association, American Economic Association, vol. 37(1), pages 7-63, March.
    13. Gersick, Connie J. G. & Hackman, J. Richard, 1990. "Habitual routines in task-performing groups," Organizational Behavior and Human Decision Processes, Elsevier, Elsevier, vol. 47(1), pages 65-97, October.
    14. Jensen, Michael C, 1986. "Agency Costs of Free Cash Flow, Corporate Finance, and Takeovers," American Economic Review, American Economic Association, American Economic Association, vol. 76(2), pages 323-29, May.
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