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An agency theoretic analysis of value creation through management buy-outs of family firms

Author

Listed:
  • Chrisman, James J.
  • Chua, Jess H.
  • Steier, Lloyd P.
  • Wright, Mike
  • McKee, D’Lisa N.

Abstract

Family firms without able and willing family successors are frequently sold to non-family managers through management buy-outs (MBOs). Whether MBOs create value is thought to be dependent upon the ability to reduce owner–manager agency costs. In this article we examine the agency costs of MBOs that acquire family firms. We contribute to theory by arguing that in such situations, value creation by reducing agency costs will depend upon pre-MBO agency costs, the ability to solve the double agency problem, and the relationship between the cost of agency control mechanisms and the residual losses from opportunism before and after the MBO.

Suggested Citation

  • Chrisman, James J. & Chua, Jess H. & Steier, Lloyd P. & Wright, Mike & McKee, D’Lisa N., 2012. "An agency theoretic analysis of value creation through management buy-outs of family firms," Journal of Family Business Strategy, Elsevier, vol. 3(4), pages 197-206.
  • Handle: RePEc:eee:fambus:v:3:y:2012:i:4:p:197-206
    DOI: 10.1016/j.jfbs.2012.10.003
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Michel, Alexandra & Kammerlander, Nadine, 2015. "Trusted advisors in a family business's succession-planning process—An agency perspective," Journal of Family Business Strategy, Elsevier, vol. 6(1), pages 45-57.
    2. repec:spr:jbecon:v:88:y:2018:i:2:d:10.1007_s11573-017-0871-7 is not listed on IDEAS
    3. Carole Howorth & Mike Wright & Paul Westhead & Deborah Allcock, 2016. "Company metamorphosis: professionalization waves, family firms and management buyouts," Small Business Economics, Springer, vol. 47(3), pages 803-817, October.
    4. Ahlers, Oliver & Hack, Andreas & Kellermanns, Franz W., 2014. "“Stepping into the buyers’ shoes”: Looking at the value of family firms through the eyes of private equity investors," Journal of Family Business Strategy, Elsevier, vol. 5(4), pages 384-396.
    5. Felix K. Thiele, 2017. "Family businesses and non-family equity: literature review and avenues for future research," Management Review Quarterly, Springer;Vienna University of Economics and Business, vol. 67(1), pages 31-63, February.

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