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The Wage and Employment Effects of Leveraged Buyouts in the UK

Author

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  • Kevin Amess
  • Mike Wright

Abstract

Using a unique hand-collected dataset, this study determines and quantifies the effects of LBOs (leveraged buyouts) on wages and employment in 1,350 LBOs. Based on an unbalanced panel 5,369 firms observed over the period 1999-2004, we find that all LBOs taken together have an insignificant effect on employment growth but have significantly lower wage growth than non-LBOs. Disaggregating LBOs we find: (1) wage growth is 0.31 of a percentage point lower for MBOs (management buyouts) and 0.97 of a percentage point lower for MBIs (management buy-ins); and (2) employment growth is 0.51 of a percentage point higher for MBOs and 0.81 of a percentage point lower for MBIs. The results indicate that MBOs and MBIs have a differing impact on firms' wage and employment behaviour and should not be treated as homogenous. The results are consistent with: (1) MBIs and MBOs involving the adjustment of wages to a more sustainable basis; (2) MBOs exploiting growth opportunities that lead to greater employment growth; and (3) MBIs not creating new employment opportunities.

Suggested Citation

  • Kevin Amess & Mike Wright, 2007. "The Wage and Employment Effects of Leveraged Buyouts in the UK," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 14(2), pages 179-195.
  • Handle: RePEc:taf:ijecbs:v:14:y:2007:i:2:p:179-195
    DOI: 10.1080/13571510701343923
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    References listed on IDEAS

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    1. Mike Wright & Steve Thompson & Ken Robbie, 1996. "Buy-ins, Buy-outs, Active Investors and Corporate Governance," Corporate Governance: An International Review, Wiley Blackwell, vol. 4(4), pages 222-234, October.
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