Management buyouts in times of economic policy uncertainty

Benjamin Hammer, Sven Mettner, Denis Schweizer and Norbert Wünsche

Finance Research Letters, 2023, vol. 52, issue C

Abstract: Using a sample of 18,225 global buyouts, we find that management buyouts (MBOs) are significantly more likely to occur if economic policy uncertainty (EPU) increases. This finding is consistent with the idea that EPU provides an opportunity for insiders to capitalize on private information and time the market. Further results suggest that market timing pays off on average. We find that MBOs achieve more favorable buyout prices and greater post-buyout operating improvements than institutional buyouts during times of high EPU. Our results hold when exploiting close national election races as a quasi-natural experiment for EPU.

Keywords: Private equity (PE); Economic policy uncertainty (EPU); Leveraged buyout; Management buyout; Entrepreneurial finance (search for similar items in EconPapers)
JEL-codes: G15 G23 G24 G28 G34 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:52:y:2023:i:c:s1544612322006754

DOI: 10.1016/j.frl.2022.103499

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