Managerial ownership, credit market conditions, undervaluation and offer premiums in management (MBOs) and leveraged buyouts (LBOs)

Usha Mittoo, Dennis Ng and Meng Yan

Journal of International Financial Markets, Institutions and Money, 2020, vol. 65, issue C

Abstract: This paper investigates the impact of lending conditions and undervaluation on the buyout choice and offer premiums in MBO versus LBO decisions. We control for endogeneity and self-selection using a two-stage regression model in a sample of US transactions. Firms with higher insider ownership are more likely to select an MBO, whereas easy lending conditions increase the likelihood of an LBO. Determinants of offer premiums are also significantly different. Our main conclusion is that many factors (in addition to managerial ownership) should be accounted for to better understand the sources of value creation in going private transactions.

Keywords: Going private; Leveraged buyouts (LBOs); Management buyouts (MBOs); Offer premiums; Ownership structure (search for similar items in EconPapers)
JEL-codes: G34 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:intfin:v:65:y:2020:i:c:s1042443120300731

DOI: 10.1016/j.intfin.2020.101189

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