LBOs, Debt And R&D Intensity

David J Ravenscraft and William F Long

Working Papers from U.S. Census Bureau, Center for Economic Studies

Abstract: 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.

Keywords: CES; economic; research; micro; data; microdata; chief; economist (search for similar items in EconPapers)
Date: 1993-02
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Citations: View citations in EconPapers (57)

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Persistent link: https://EconPapers.repec.org/RePEc:cen:wpaper:93-3

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