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The Impact of Lbos on Investment Policies and Operations of Acquired French Firms

Author

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  • Philippe Desbrières

    () (Université de Bourgogne)

  • Alain Schatt

Abstract

This paper evaluates the extent that French LBO targets' investment policy and operations can account for their overperformance discrepancy. Our empirical study has been carried out on 132 French LBOs between 1989 and 1994. The results show that the abnormal plunge in economic return cannot be explained by overinvestments or by inefficient working capital management. Nevertheless, abnormal increases in wages, supplies and/or sales price reductions appear to be prominent.

Suggested Citation

  • Philippe Desbrières & Alain Schatt, 2002. "The Impact of Lbos on Investment Policies and Operations of Acquired French Firms," Working Papers CREGO 1021002, Université de Bourgogne - CREGO EA7317 Centre de recherches en gestion des organisations.
  • Handle: RePEc:dij:wpfarg:1021002 Note: version française publiée dans Finance Contrôle Stratégie, vol.5, n°4, décembre 2002.
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    File URL: http://crego.u-bourgogne.fr/images/stories/wp/1021002.pdf
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    References listed on IDEAS

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    1. Fama, Eugene F & Jensen, Michael C, 1983. "Separation of Ownership and Control," Journal of Law and Economics, University of Chicago Press, vol. 26(2), pages 301-325, June.
    2. Gérard Charreaux & Philippe Desbrières, 2001. "Corporate Governance: Stakeholder Value Versus Shareholder Value," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 5(2), pages 107-128, June.
    3. Brent W. Ambrose & Drew B. Winters, 1992. "Does an Industry Effect Exist for Leveraged Buyouts?," Financial Management, Financial Management Association, vol. 21(1), Spring.
    4. Jensen, Michael C, 1986. "Agency Costs of Free Cash Flow, Corporate Finance, and Takeovers," American Economic Review, American Economic Association, vol. 76(2), pages 323-329, May.
    5. Michael C. Jensen & William H. Heckling, 1995. "Specific And General Knowledge, And Organizational Structure," Journal of Applied Corporate Finance, Morgan Stanley, vol. 8(2), pages 4-18.
    6. Wright, Mike & Thompson, Steve & Robbie, Ken, 1992. "Venture capital and management-led, leveraged buy-outs: A European perspective," Journal of Business Venturing, Elsevier, vol. 7(1), pages 47-71, January.
    7. Kaplan, Steven, 1989. "The effects of management buyouts on operating performance and value," Journal of Financial Economics, Elsevier, vol. 24(2), pages 217-254.
    8. 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.
    9. Hite, Gailen L & Vetsuypens, Michael R, 1989. " Management Buyouts of Divisions and Shareholder Wealth," Journal of Finance, American Finance Association, vol. 44(4), pages 953-970, September.
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    Cited by:

    1. repec:hal:wpaper:hal-01335664 is not listed on IDEAS
    2. Philippe Desbrières & Alain Schatt, 2002. "L'incidence des LBO sur la politique d'investissement et la gestion opérationnelle des firmes acquises:le cas français," Revue Finance Contrôle Stratégie, revues.org, vol. 5(4), pages 79-106, December.
    3. Troy D. Smith, 2015. "Private Equity Investment in India: Efficiency vs Expansion," Discussion Papers 15-011, Stanford Institute for Economic Policy Research.

    More about this item

    Keywords

    Leveraged buy-out; performance; investment policy; operations;

    JEL classification:

    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies

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