Assessing the Impact of Management Buyouts on Economic Efficiency: Plant-Level Evidence from the United Kingdom
AbstractWe assess the total factor productivity (TFP) of plants before and after management buyouts (MBOs), using the Annual Business Inquiry Respondents Database (ARD) file, which contains longitudinal data for approximately 36,000 U.K. manufacturing establishments. Our preliminary results suggest that these MBO establishments were less productive than comparable plants before the transfer of ownership. We also find that MBO plants experienced a substantial increase in productivity after a buyout. These post-buyout productivity gains appear to be pervasive across industries. The results imply that the improvement in economic performance may be due to measures undertaken by new owners or managers to reduce the labor intensity of production, through the outsourcing of intermediate goods and materials. Our evidence suggests that MBOs may be a useful mechanism for reducing agency costs and enhancing economic efficiency. More generally, the findings are consistent with recent theoretical and empirical evidence (Jovanovic and Rousseau (2002a, 2002b)) suggesting that takeovers result in the reallocation of a firm's resources to more efficient uses and to better managers.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Rensselaer Polytechnic Institute, Department of Economics in its series Rensselaer Working Papers in Economics with number 0304.
Date of creation: Oct 2003
Date of revision:
Other versions of this item:
- Richard Harris & Donald S. Siegel & Mike Wright, 2005. "Assessing the Impact of Management Buyouts on Economic Efficiency: Plant-Level Evidence from the United Kingdom," The Review of Economics and Statistics, MIT Press, vol. 87(1), pages 148-153, February.
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Lichtenberg, Frank R & Siegel, Donald, 1990. "The Effect of Ownership Changes on the Employment and Wages of Central Office and Other Personnel," Journal of Law and Economics, University of Chicago Press, vol. 33(2), pages 383-408, October.
- Harris, Richard I D & Drinkwater, Stephen, 2000. " UK Plant and Machinery Capital Stocks and Plant Closures," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 62(2), pages 243-65, May.
- Steven N. Kaplan, 1992.
"The Staying Power of Leveraged Buyouts,"
NBER Working Papers
3653, National Bureau of Economic Research, Inc.
- Kaplan, Steven, 1989. "The effects of management buyouts on operating performance and value," Journal of Financial Economics, Elsevier, vol. 24(2), pages 217-254.
- Richard Blundell & Stephen Bond, 2000.
"GMM Estimation with persistent panel data: an application to production functions,"
Taylor & Francis Journals, vol. 19(3), pages 321-340.
- Richard Blundell & Steve Bond, 1999. "GMM estimation with persistent panel data: an application to production functions," IFS Working Papers W99/04, Institute for Fiscal Studies.
- Arellano, Manuel & Bond, Stephen, 1991.
"Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations,"
Review of Economic Studies,
Wiley Blackwell, vol. 58(2), pages 277-97, April.
- Tom Doan, . "RATS program to replicate Arellano-Bond 1991 dynamic panel," Statistical Software Components RTZ00169, Boston College Department of Economics.
- Boyan Jovanovic & Peter L. Rousseau, 2008.
"Mergers as Reallocation,"
The Review of Economics and Statistics,
MIT Press, vol. 90(4), pages 765-776, November.
- Boyan Jovanovic & Peter L. Rousseau, 2002.
"The Q-Theory of Mergers,"
NBER Working Papers
8740, National Bureau of Economic Research, Inc.
- Jensen, Michael C, 1993.
" The Modern Industrial Revolution, Exit, and the Failure of Internal Control Systems,"
Journal of Finance,
American Finance Association, vol. 48(3), pages 831-80, July.
- Michael C. Jensen, 1994. "The Modern Industrial Revolution, Exit, And The Failure Of Internal Control Systems," Journal of Applied Corporate Finance, Morgan Stanley, vol. 6(4), pages 4-23.
- Michael C. Jensen, 2010. "The Modern Industrial Revolution, Exit, and the Failure of Internal Control Systems," Journal of Applied Corporate Finance, Morgan Stanley, vol. 22(1), pages 43-58.
- Frank R. Lichtenberg & Donald Siegel, 1987. "Productivity and Changes in Ownership of Manufactoring Plants," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 18(3), pages 643-684.
- Frank R Lichtenberg & Donald Siegel, 1989.
"The Effects Of Leveraged Buyouts On Productivity And Related Aspects Of Firm Behavior,"
89-5, Center for Economic Studies, U.S. Census Bureau.
- Lichtenberg, Frank R. & Siegel, Donald, 1990. "The effects of leveraged buyouts on productivity and related aspects of firm behavior," Journal of Financial Economics, Elsevier, vol. 27(1), pages 165-194, September.
- Frank R. Lichtenberg & Donald Siegel, 1991. "The Effects of Leveraged Buyouts on Productivity and Related Aspects of Firm Behavior," NBER Working Papers 3022, National Bureau of Economic Research, Inc.
- Lichtenberg, Frank R & Siegel, Donald, 1991.
"The Impact of R&D Investment on Productivity--New Evidence Using Linked R&D-LRD Data,"
Western Economic Association International, vol. 29(2), pages 203-29, April.
- Frank R. Lichtenberg & Donald Siegel, 1991. "The Impact of R&D Investment On Productivity - New Evidence Using Linked R&D-LRD Data," NBER Working Papers 2901, National Bureau of Economic Research, Inc.
- Amess, Kevin, 2002. "Management Buyouts and Firm-Level Productivity: Evidence from a Panel of UK Manufacturing Firms," Scottish Journal of Political Economy, Scottish Economic Society, vol. 49(3), pages 304-17, August.
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page. reading list or among the top items on IDEAS.Access and download statisticsgeneral information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (John Heim) The email address of this maintainer does not seem to be valid anymore. Please ask John Heim to update the entry or send us the correct address.
If references are entirely missing, you can add them using this form.