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Unit Management Buyouts, Stockholder Wealth, And Selling Firms' Characteristics

Author

Listed:
  • Wallace N. Davidson
  • Louis T.W. Cheng

Abstract

Previous research on unit management buyouts, UMBs, has shown that selling firms benefit from the selloff transaction. The current research demonstrates that when the selling firm has either poor liquidity or poor earnings, selling firm shareholders do not benefit as much. We hypothesize that the unit managers have knowledge about the selling firm's difficulties so they do not pay as large a premium for the assets. Since the unit managers technically are employed by the selling firm shareholders, their bargaining to achieve a better price is an agency cost. Finally, selloff frequency does not affect seller abnormal returns.

Suggested Citation

  • Wallace N. Davidson & Louis T.W. Cheng, 1994. "Unit Management Buyouts, Stockholder Wealth, And Selling Firms' Characteristics," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 21(4), pages 563-576, June.
    • Handle: RePEc:bla:jbfnac:v:21:y:1994:i:4:p:563-576
    DOI: 10.1111/j.1468-5957.1994.tb00336.x
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    References listed on IDEAS

    as
    1. Jack W. Trifts & Neil W. Sicherman & Rodney L. Roenfeldt & Francisco de Cossio, 1990. "Divestiture To Unit Managers And Shareholder Wealth," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 13(2), pages 167-172, June.
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