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Measuring the Effect of Restructuring on Corporate Performance: The Case of Management Buyouts

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  • Smart, Scott B
  • Waldfogel, Joel

Abstract

Recent research has attempted to document that the financial gains associated with takeovers, LBOs, and other types of restructuring are attributable to subsequent improvements in operating performance. In this paper, the authors develop a more general framework for measuring the effect of corporate restructuring on performance and apply the framework to a sample of firms taken private by their management. They demonstrate that the estimation approaches employed in the literature embody restrictions on the general framework which the data can reject. However, the authors' best estimates provide evidence that management buyouts improve corporate performance, and the magnitudes of these improvements are similar to existing estimates. Copyright 1994 by MIT Press.

Suggested Citation

  • Smart, Scott B & Waldfogel, Joel, 1994. "Measuring the Effect of Restructuring on Corporate Performance: The Case of Management Buyouts," The Review of Economics and Statistics, MIT Press, vol. 76(3), pages 503-511, August.
  • Handle: RePEc:tpr:restat:v:76:y:1994:i:3:p:503-11
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    Cited by:

    1. 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.
    2. 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.
    3. Elizabeth E. Bailey & Constance E. Helfat, 2003. "External management succession, human capital, and firm performance: an integrative analysis," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 24(4), pages 347-369.
    4. Gottschalg, Oliver & Berg, Achim, 2005. "Understanding value generation in buyouts," Les Cahiers de Recherche 824, HEC Paris.
    5. Renneboog, L.D.R. & Simons, T., 2005. "Public-to-Private Transactions : LBOs, MBOs, MBIs and IBOs," Discussion Paper 2005-023, Tilburg University, Tilburg Law and Economic Center.
    6. Lori Holder-Webb & Thomas Lopez & Philip Regier, 2005. "The Performance Consequences of Operational Restructurings," Review of Quantitative Finance and Accounting, Springer, vol. 25(4), pages 319-339, December.
    7. Van de Gucht, Linda M. & Moore, William T., 1998. "Predicting the duration and reversal probability of leveraged buyouts," Journal of Empirical Finance, Elsevier, pages 299-315.
    8. Renneboog, L.D.R. & Simons, T., 2005. "Public-to-Private Transactions : LBOs, MBOs, MBIs and IBOs," Discussion Paper 2005-023, Tilburg University, Tilburg Law and Economic Center.
    9. Cohn, Jonathan B. & Mills, Lillian F. & Towery, Erin M., 2014. "The evolution of capital structure and operating performance after leveraged buyouts: Evidence from U.S. corporate tax returns," Journal of Financial Economics, Elsevier, vol. 111(2), pages 469-494.
    10. Aurelie Sannajust, 2009. "Les motivations et la performance des opérations de retrait de la cote: une revue," Post-Print halshs-00521178, HAL.
    11. Renneboog, Luc & Vansteenkiste, Cara, 2017. "Leveraged Buyouts : A Survey of the Literature," Discussion Paper 2017-015, Tilburg University, Center for Economic Research.
    12. Goergen, Marc & O׳Sullivan, Noel & Wood, Geoffrey, 2014. "The employment consequences of private equity acquisitions: The case of institutional buy outs," European Economic Review, Elsevier, vol. 71(C), pages 67-79.
    13. Kevin R. Foster, 2002. "Downsizing : An Examination of the Consequences of Mass Layoffs," Journal of Private Enterprise, The Association of Private Enterprise Education, pages 109-130.
    14. Ayash, Brian & Schütt, Harm, 2016. "Does going private add value through operating improvements?," Journal of Corporate Finance, Elsevier, vol. 40(C), pages 192-215.
    15. 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, pages 607-633.

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