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Managerial innovation incentives, management buyouts, and shareholders' intolerance of failure

Shinsuke Kamoto

Journal of Corporate Finance, 2017, vol. 42, issue C, 55-74

Abstract: This study demonstrates that, apart from managerial agency problem, shareholders' intolerance of failure also deteriorates managerial innovation incentives in public firms. Furthermore, management buyouts improve the innovation intensity, even if managers gain no excess value from the buyouts in collaboration with private equity firms. The study provides insights into the interrelation between firms' innovation, corporate governance, and dividend policy. It presents a rationale behind empirical evidence of a positive relationship between management buyouts and innovation intensity. It provides empirical implications on firms' characteristics that facilitate management buyouts and the return and risk structure of private equity firms.

Keywords: Management buyouts; Innovation; Corporate governance; Managerial opportunism; Investors' sophistication (search for similar items in EconPapers)
JEL-codes: G32 G34 G35 (search for similar items in EconPapers)
Date: 2017
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