LBOs, Debt And R&D Intensity
This paper details the impact of debt on R&D intensity for firms undergoing a leveraged buyout (LBO). We develop seven hypotheses based on capital market imperfection theories and agency theory. To test these hypotheses, we compare 72 R&D performing LBOs with 3329 non-LBO control observations and 126 LBOs with little or no R&D expenditures. The regressions yield four statistically significant major findings. First, pre-LBO R&D intensity is roughly one-half of the overall manufacturing mean and two-thirds of the firm's industry mean. Second, LBOs cause R&D intensity to drop by 40 percent. Third, large firms tend to have smaller LBO- related declines in R&D intensity. Fourth, R&D intensive LBOs outperform both their non-LBO industry peers and other LBOs without R&D expenditures.
|Date of creation:||Feb 1993|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: (301) 763-6460
Fax: (301) 763-5935
Web page: http://www.census.gov/ces
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Myers, Stewart C, 1984. " The Capital Structure Puzzle," Journal of Finance, American Finance Association, vol. 39(3), pages 575-92, July.
- Hall, Bronwyn H., 1989.
"TheImpact of Corporate Restructuring On Industrial Research and Development,"
Department of Economics, Working Paper Series
qt7dw7p5dq, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
- Bronwyn H. Hall, 1989. "The Impact of Corporate Restructuring on Industrial Research and Development," NBER Working Papers 3216, National Bureau of Economic Research, Inc.
- Bronwyn H. Hall., 1989. "The Impact of Corporate Restructuring on Industrial Research and Development," Economics Working Papers 89-129, University of California at Berkeley.
- Jensen, Michael C. & Meckling, William H., 1976. "Theory of the firm: Managerial behavior, agency costs and ownership structure," Journal of Financial Economics, Elsevier, vol. 3(4), pages 305-360, October.
- Stewart C. Myers, 1984. "Capital Structure Puzzle," NBER Working Papers 1393, National Bureau of Economic Research, Inc.
- Randall Morck & Andrei Shleifer & Robert W. Vishny, 1988. "Characteristics of Targets of Hostile and Friendly Takeovers," NBER Chapters, in: Corporate Takeovers: Causes and Consequences, pages 101-136 National Bureau of Economic Research, Inc.
- Jensen, Michael C, 1986. "Agency Costs of Free Cash Flow, Corporate Finance, and Takeovers," American Economic Review, American Economic Association, vol. 76(2), pages 323-29, May.
- Frank R. Lichtenberg & Donald Siegel, 1991.
"The Effects of Leveraged Buyouts on Productivity and Related Aspects of Firm Behavior,"
NBER Working Papers
3022, National Bureau of Economic Research, Inc.
- Lichtenberg, Frank R. & Siegel, Donald, 1990. "The effects of leveraged buyouts on productivity and related aspects of firm behavior," Journal of Financial Economics, Elsevier, vol. 27(1), pages 165-194, September.
- Frank R Lichtenberg & Donald Siegel, 1989. "The Effects Of Leveraged Buyouts On Productivity And Related Aspects Of Firm Behavior," Working Papers 89-5, Center for Economic Studies, U.S. Census Bureau.
- Lehn, Kenneth & Poulsen, Annette, 1989. " Free Cash Flow and Stockholder Gains in Going Private Transactions," Journal of Finance, American Finance Association, vol. 44(3), pages 771-87, July.
- Diamond, Douglas W, 1984. "Financial Intermediation and Delegated Monitoring," Review of Economic Studies, Wiley Blackwell, vol. 51(3), pages 393-414, July.
- Leland, Hayne E & Pyle, David H, 1977.
"Informational Asymmetries, Financial Structure, and Financial Intermediation,"
Journal of Finance,
American Finance Association, vol. 32(2), pages 371-87, May.
- Hayne E. Leland and David H. Pyle., 1976. "Informational Asymmetries, Financial Structure, and Financial Intermediation," Research Program in Finance Working Papers 41, University of California at Berkeley.
- Chan, Su Han & Martin, John D. & Kensinger, John W., 1990. "Corporate research and development expenditures and share value," Journal of Financial Economics, Elsevier, vol. 26(2), pages 255-276, August.
- Cohen, Wesley M & Levinthal, Daniel A, 1989. "Innovation and Learning: The Two Faces of R&D," Economic Journal, Royal Economic Society, vol. 99(397), pages 569-96, September.
- Boot, Arnoud W A, 1992. " Why Hang on to Losers? Divestitures and Takeovers," Journal of Finance, American Finance Association, vol. 47(4), pages 1401-23, September.
- Kaplan, Steven, 1989. "The effects of management buyouts on operating performance and value," Journal of Financial Economics, Elsevier, vol. 24(2), pages 217-254.
- Myers, Stewart C., 1984. "Capital structure puzzle," Working papers 1548-84., Massachusetts Institute of Technology (MIT), Sloan School of Management.
- Bhattacharya, Sudipto & Ritter, Jay R, 1983. "Innovation and Communication: Signalling with Partial Disclosure," Review of Economic Studies, Wiley Blackwell, vol. 50(2), pages 331-46, April.
- Williamson, Oliver E, 1988. " Corporate Finance and Corporate Governance," Journal of Finance, American Finance Association, vol. 43(3), pages 567-91, July.
When requesting a correction, please mention this item's handle: RePEc:cen:wpaper:93-3. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Fariha Kamal)
If references are entirely missing, you can add them using this form.