LBOs, Reversions and Implicit Contracts

LBOs, Reversions and Implicit Contracts ABSTRACT The conventional view of going‐private transactions is that they are designed to enhance the efficiency of the firm (for example, Jensen (1986)). A starkly different view is that these and other control transactions are motivated to effect transfers from other stakeholders in the firm to equity holders (Shleifer and Summers (1988)). This study exploits data describing pension terminations as a way to test these theories. We conclude that the efficiency theory can plausibly explain a substantial number of LBO‐related terminations, but not enough to undermine the transfer theory. More specific predictions from the efficiency theory are needed to structure more exacting tests. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png The Journal of Finance Wiley

LBOs, Reversions and Implicit Contracts

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Publisher
Wiley
Copyright
1992 The American Finance Association
ISSN
0022-1082
eISSN
1540-6261
DOI
10.1111/j.1540-6261.1992.tb03981.x
Publisher site
See Article on Publisher Site

Abstract

ABSTRACT The conventional view of going‐private transactions is that they are designed to enhance the efficiency of the firm (for example, Jensen (1986)). A starkly different view is that these and other control transactions are motivated to effect transfers from other stakeholders in the firm to equity holders (Shleifer and Summers (1988)). This study exploits data describing pension terminations as a way to test these theories. We conclude that the efficiency theory can plausibly explain a substantial number of LBO‐related terminations, but not enough to undermine the transfer theory. More specific predictions from the efficiency theory are needed to structure more exacting tests.

Journal

The Journal of FinanceWiley

Published: Mar 1, 1992

References

  • Excess asset reversions and shareholder wealth
    Alderson, Alderson; Chen, Chen
  • Management buyouts: Evidence on taxes as a source of value
    Kaplan, Kaplan
  • Free cash flow and stockholder gains in going private transactions
    Lehn, Lehn; Annette, Annette
  • The principles of corporate pension finance
    Treynor, Treynor

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