Limits on managerial discretion in management buyouts: the effectiveness of institutional, market and legal mechanisms

John Easterwood, Anju Seth and Ronald Singer
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John Easterwood: Virginia Tech., Blacksburg, VA, USA, Postal: Virginia Tech., Blacksburg, VA, USA
Anju Seth: University of Illinois at Urbana-Champaign, Champaign, IL, USA, Postal: University of Illinois at Urbana-Champaign, Champaign, IL, USA
Ronald Singer: University of Houston, Houston, TX, USA, Postal: University of Houston, Houston, TX, USA

Managerial and Decision Economics, 1997, vol. 18, issue 7-8, 645-666

Abstract: Recent changes in the legal environment faced by US corporations suggest that the shareholder-manager conflict of interest, and the effectiveness of mechanisms to narrow this divergence, are issues of continuing importance. This study examines the linkages between institutional, market and legal mechanisms to control managerial discretion in management buyouts, and the circumstances under which each type of mechanism is effective. We find that these mechanisms do act to control managerial discretion in management buyouts to some degree. At the same time, there appear to be significant frictions which act to partially insulate managers from these types of governance, limiting their effectiveness. © 1997 John Wiley & Sons, Ltd.

Date: 1997
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Persistent link: https://EconPapers.repec.org/RePEc:wly:mgtdec:v:18:y:1997:i:7-8:p:645-666

DOI: 10.1002/(SICI)1099-1468(199711/12)18:7/8<645::AID-MDE863>3.0.CO;2-2

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