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Le rôle de la dette dans le LBO : une revue de la littérature

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Listed author(s):
  • Ouidad Yousfi

Abstract

After 1985, a large number of LBO project were not able to meet their debt. Among these cases, the Federated Department Stores LBO repurchased by Campeau and the Gateway LBO repurchased by Macy's. But, the conventional view of LBO transactions is that they are designed to improve the efficiency of the firm. The question raised in this paper is the following : What makes the buyout debt so advantageous ? To answer to the question, we provide a survey of the theoretical and empirical literature based on two opposite sides : On the first side, debt is value enhancing (the agency theory, the tax savings theory, the asymmetric information theory, and the free cash flows theory). On the other side, debt creates private value captured by shareholders : The shareholders' gains come from the exploitation of financial market misevaluation, from the usage of tax benefits, and from rent expropriation from worker, suppliers and other corporate stakeholders (the transfer theory).

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File URL: http://economix.fr/pdf/dt/2007/WP_EcoX_2007-8.pdf
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Paper provided by University of Paris West - Nanterre la Defense, EconomiX in its series EconomiX Working Papers with number 2007-8.

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Length: 29 pages
Date of creation: 2007
Handle: RePEc:drm:wpaper:2007-8
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Keywords: Leverage buy out; asymmetric information; debt; capital structure; free cash-flows;

Other versions of this item:

Find related papers by JEL classification:
  • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
  • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
  • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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  1. David J Ravenscraft & William F Long, 1993. "The Financial Performance of Whole Company LBOs," Working Papers 93-16, Center for Economic Studies, U.S. Census Bureau.
  2. Catherine Casamatta, 2003. "Financing and Advising: Optimal Financial Contracts with Venture Capitalists," Journal of Finance, American Finance Association, vol. 58(5), pages 2059-2086, October.
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  7. Stulz, ReneM., 1990. "Managerial discretion and optimal financing policies," Journal of Financial Economics, Elsevier, vol. 26(1), pages 3-27, July.
  8. Andrei Shleifer & Lawrence H. Summers, 1988. "Breach of Trust in Hostile Takeovers," NBER Chapters,in: Corporate Takeovers: Causes and Consequences, pages 33-68 National Bureau of Economic Research, Inc.
  9. Bruton, Garry D. & Keels, J. Kay & Scifres, Elton L., 2002. "Corporate restructuring and performance: An agency perspective on the complete buyout cycle," Journal of Business Research, Elsevier, vol. 55(9), pages 709-724, September.
  10. Leland, Hayne E & Pyle, David H, 1977. "Informational Asymmetries, Financial Structure, and Financial Intermediation," Journal of Finance, American Finance Association, vol. 32(2), pages 371-387, May.
  11. John Easterwood & Anju Seth, 1993. "Strategic Restructuring In Large Management Buyouts," Journal of Applied Corporate Finance, Morgan Stanley, vol. 6(1), pages 25-37.
  12. Douglas W. Diamond, 1984. "Financial Intermediation and Delegated Monitoring," Review of Economic Studies, Oxford University Press, vol. 51(3), pages 393-414.
  13. DeAngelo, Harry & DeAngelo, Linda & Rice, Edward M, 1984. "Going Private: Minority Freezeouts and Stockholder Wealth," Journal of Law and Economics, University of Chicago Press, vol. 27(2), pages 367-401, October.
  14. Warga, Arthur & Welch, Ivo, 1993. "Bondholder Losses in Leveraged Buyouts," Review of Financial Studies, Society for Financial Studies, vol. 6(4), pages 959-982.
  15. Diamond, Douglas W., 1993. "Seniority and maturity of debt contracts," Journal of Financial Economics, Elsevier, vol. 33(3), pages 341-368, June.
  16. Miller, Merton H, 1977. "Debt and Taxes," Journal of Finance, American Finance Association, vol. 32(2), pages 261-275, May.
  17. Demsetz, Harold, 1983. "The Structure of Ownership and the Theory of the Firm," Journal of Law and Economics, University of Chicago Press, vol. 26(2), pages 375-390, June.
  18. Ippolito, Richard A & James, William H, 1992. " LBOs, Reversions and Implicit Contracts," Journal of Finance, American Finance Association, vol. 47(1), pages 139-167, March.
  19. Muscarella, Chris J & Vetsuypens, Michael R, 1990. " Efficiency and Organizational Structure: A Study of Reverse LBOs," Journal of Finance, American Finance Association, vol. 45(5), pages 1389-1413, December.
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