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- Title
LBOs, DEBT AND R&D INTENSITY.
- Authors
Long, William F.; Ravenscraft, David J.
- Abstract
This paper deals with 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.
- Subjects
LEVERAGED buyouts; DEBT management; RESEARCH &; development; CAPITAL market; REGRESSION analysis; MERGERS &; acquisitions; ORGANIZATIONAL behavior; AGENCY theory; ORGANIZATIONAL change
- Publication
Strategic Management Journal (John Wiley & Sons, Inc.) - 1980 to 2009, 1993, Vol 14, p119
- ISSN
0143-2095
- Publication type
Article
- DOI
10.1002/smj.4250140910