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Active Investors, LBOs, and the Privatization of Bankruptcy


  • Michael C. Jensen


In this testimony to the House Ways and Means Committee on February 1, 1989 (when LBOs and other highly leveraged transactions were under fierce attack by politicians and the media), the author identified "LBO associations" such as KKR and Forstmann Little as a valuable innovation in organizational form-a new model of management and governance that was competing directly with the headquarters of large public corporations, especially conglomerates. In the author's words, LBOs "substitute incentives provided by compensation and ownership plans for the direct monitoring and often centralized decision-making in the typical corporate bureaucracy." Copyright Copyright (c) 2010 Morgan Stanley.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Michael C. Jensen, 1989. "Active Investors, LBOs, and the Privatization of Bankruptcy," Journal of Applied Corporate Finance, Morgan Stanley, vol. 2(1), pages 35-44.
  • Handle: RePEc:bla:jacrfn:v:2:y:1989:i:1:p:35-44

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