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- Title
Manager Divestment in Leveraged Buyouts.
- Authors
Ang, James; Hutton, Irena; Majadillas, Mary Anne
- Abstract
We examine changes in managers' investment in the firm around leveraged buyouts and find agency costs counter to those described in extant literature. In majority of deals during 1997-2008, managers divested a portion of their pre-LBO shareholdings while maintaining an ownership stake in the post-LBO firm. Such divestment opportunities encourage managers to behave in a way that benefits existing shareholders but is costly to new investors. We report a positive relation between management's divestment and pre-LBO earnings management, market timing, and better buyout pricing. Although managerial divestment also leads to subpar post-buyout performance, the involvement of private equity mitigates it.
- Subjects
PRIVATE equity; LEVERAGED buyouts; EARNINGS management; AGENCY costs; DISINVESTMENT; MANAGEMENT
- Publication
European Financial Management, 2014, Vol 20, Issue 3, p462
- ISSN
1354-7798
- Publication type
Article
- DOI
10.1111/j.1468-036X.2013.12018.x