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Management Equity Ownership, Debt and Performance: Some Evidence from UK Management Buyouts

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  • Thompson, R S
  • Wright, Mike
  • Robbie, Ken

Abstract

This paper presents an empirical examination of the effectiveness of the incentive arrangements incorporated in management buyouts. It calculates and analyzes the excess returns to capital between buyout and public share offering for a sample of U.K. buyouts obtaining a market quotation between 1984 and 1989. After controlling for agency and signaling factors associated with the flotation and for firm-specific characteristics, management equity share emerges as the dominant influence on performance. This result is consistent with the view that the management buyout is principally a device to increase managerial motivation. Copyright 1992 by Scottish Economic Society.

Suggested Citation

  • Thompson, R S & Wright, Mike & Robbie, Ken, 1992. "Management Equity Ownership, Debt and Performance: Some Evidence from UK Management Buyouts," Scottish Journal of Political Economy, Scottish Economic Society, vol. 39(4), pages 413-430, November.
    • Handle: RePEc:bla:scotjp:v:39:y:1992:i:4:p:413-30
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    Citations

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    Cited by:

    1. Claude Laurin & Anthony E. Boardman & Aidan R. Vining, 2004. "Government Underpricing of Share‐Issue Privatizations," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 75(3), pages 399-429, September.
    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. Toms, J. S., 1998. "The supply of and demand for accounting information in an unregulated market: Examples from the lancashire cotton mills, 1855-1914," Accounting, Organizations and Society, Elsevier, vol. 23(2), pages 217-238, February.
    4. Amess, Kevin & Stiebale, Joel & Wright, Mike, 2016. "The impact of private equity on firms׳ patenting activity," European Economic Review, Elsevier, vol. 86(C), pages 147-160.
    5. Mike Wright & Nick Wilson & Ken Robbie, 1996. "The Longer-Term Effects of Management-Led Buy-Outs," Journal of Entrepreneurial Finance, Pepperdine University, Graziadio School of Business and Management, vol. 5(3), pages 213-234, Fall.
    6. Dale, B.G. & Richardson, R. & Wright, D.M., 2001. "Triple inaugural address for the Rotating Chair for Research in Organisation and Management," ERIM Inaugural Address Series Research in Management EIA-2001-001-ORG, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam..
    7. Kevin Amess & Sourafel Girma, 2009. "Do Stock Markets Value Efficiency?," Scottish Journal of Political Economy, Scottish Economic Society, vol. 56(3), pages 321-331, July.
    8. Roe, R.A. & Zinovieva, I.L. & Dienes, E. & Ten Horn, L.A., 1997. "Firm ownership and work motivation : An empirical study on the transition in Bulgaria and Hungary, 1994-1995," WORC Paper 97.09.010/4, Tilburg University, Work and Organization Research Centre.
    9. 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.
    10. Loris Guery & Anne Stevenot & Geoffrey T. Wood & Chris Brewster, 2017. "The Impact of Private Equity on Employment: The Consequences of Fund Country of Origin—New Evidence from France," Industrial Relations: A Journal of Economy and Society, Wiley Blackwell, vol. 56(4), pages 723-750, October.
    11. Phillippe Desbrières & Alain Schatt, 2002. "The Impacts of LBOs on the Performance of Acquired Firms: The French Case," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 29(5‐6), pages 695-729.
    12. 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.
    13. Steve Thompson, 1999. "Increasingly Marginal Utilities: Diversification and Free Cash Flow in Newly Privatized UK Utilities," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 15(1), pages 25-42, August.
    14. Amess, Kevin & Stiebale, Joel & Wright, Mike, 2015. "The impact of private equity on firms' innovation activity," DICE Discussion Papers 184, Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    15. Kevin Amess & Mike Wright, 2012. "Leveraged buyouts, private equity and jobs," Small Business Economics, Springer, vol. 38(4), pages 419-430, May.
    16. Igor Filatotchev & Trevor Buck & Mike Wright, 1992. "Privatisation and Entrepreneurship in the Break-up of the USSR," The World Economy, Wiley Blackwell, vol. 15(4), pages 505-524, July.
    17. Fabio Bertoni & María Ferrer & José Martí, 2013. "The different roles played by venture capital and private equity investors on the investment activity of their portfolio firms," Small Business Economics, Springer, vol. 40(3), pages 607-633, April.
    18. Aurélie Sannajust & Alexander Groh, 2023. "Pioneering management buy-out and entrepreneurial finance research: Mike Wright’s research legacy," Small Business Economics, Springer, vol. 60(1), pages 1-35, January.

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