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The Effect of Management Buyouts on Firm-level Technical Inefficiency: Evidence from a Panel of UK Machinery and Equipment Manufacturers

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  • Kevin Amess

    () (University of Leicester, UK)

Abstract

The longer-term technical efficiency effects of management buyouts (MBOs) are evaluated using a stochastic production frontier approach on a panel of UK manufacturing firms. The results, based on the period 1986-1997, indicate that firms with the MBO governance structure: (1) have higher efficiency in the two years before the transaction but not prior to that; (2) have efficiency 7%, 7.5%, 4%, and 7% higher in each of the first four years post-buyout; (3) do not have superior efficiency beyond the fifth year post-buyout. This is consistent with MBOs creating managerial incentives that improve firm-level performance. Copyright Blackwell Publishing Ltd 2003.

Suggested Citation

  • Kevin Amess, 2003. "The Effect of Management Buyouts on Firm-level Technical Inefficiency: Evidence from a Panel of UK Machinery and Equipment Manufacturers," Journal of Industrial Economics, Wiley Blackwell, vol. 51(1), pages 35-44, March.
  • Handle: RePEc:bla:jindec:v:51:y:2003:i:1:p:35-44
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    Cited by:

    1. Alperovych, Yan & Hübner, Georges & Lobet, Fabrice, 2015. "How does governmental versus private venture capital backing affect a firm's efficiency? Evidence from Belgium," Journal of Business Venturing, Elsevier, vol. 30(4), pages 508-525.
    2. Alperovych, Yan & Amess, Kevin & Wright, Mike, 2013. "Private equity firm experience and buyout vendor source: What is their impact on efficiency?," European Journal of Operational Research, Elsevier, vol. 228(3), pages 601-611.
    3. Cumming, Douglas & Siegel, Donald S. & Wright, Mike, 2007. "Private equity, leveraged buyouts and governance," Journal of Corporate Finance, Elsevier, vol. 13(4), pages 439-460, September.
    4. repec:ucp:jlabec:doi:10.1086/690712 is not listed on IDEAS
    5. Tåg, Joacim, 2010. "The Real Effects of Private Equity Buyouts," Working Paper Series 851, Research Institute of Industrial Economics.
    6. Martin Olsson & Joacim Tåg, 2017. "Private Equity, Layoffs, and Job Polarization," Journal of Labor Economics, University of Chicago Press, vol. 35(3), pages 697-754.
    7. Charlie Weir & Peter Jones & Mike Wright, 2015. "Public to private transactions, private equity and financial health in the UK: an empirical analysis of the impact of going private," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 19(1), pages 91-112, February.
    8. Hammond, Christopher J., 2009. "The effect of organisational change on UK public library efficiency," International Journal of Production Economics, Elsevier, vol. 121(1), pages 286-295, September.
    9. Scellato, Giuseppe & Ughetto, Elisa, 2013. "Real effects of private equity investments: Evidence from European buyouts," Journal of Business Research, Elsevier, vol. 66(12), pages 2642-2649.
    10. Amess, Kevin & Stiebale, Joel & Wright, Mike, 2015. "The impact of private equity on firms' innovation activity," DICE Discussion Papers 184, University of Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    11. Norbäck, Pehr-Johan & Persson, Lars & Tåg, Joacim Ingemar, 2012. "Buying to Sell: Private Equity Buyouts and Industrial Restructuring," CEPR Discussion Papers 8992, C.E.P.R. Discussion Papers.
    12. A. Edward Safarian, 2011. "International Mergers and Acquisitions," Chapters,in: International Handbook on the Economics of Integration, Volume III, chapter 6 Edward Elgar Publishing.
    13. Norbäck, Pehr-Johan & Persson, Lars & Tåg, Joacim, 2010. "Buying to Sell: A Theory of Buyouts," Working Paper Series 817, Research Institute of Industrial Economics.
    14. Kevin Amess & Mike Wright, 2012. "Leveraged buyouts, private equity and jobs," Small Business Economics, Springer, vol. 38(4), pages 419-430, May.

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