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The Effect of Management Buyouts on Firm–level Technical Inefficiency: Evidence from a Panel of UK Machinery and Equipment Manufacturers

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  • Kevin Amess

Abstract

The longer–term technical efficiency effects of management buyouts (MBOs) are evaluated using a stochastic production frontier approach on a panel of UK manufacturing firms. The results, based on the period 1986–1997, indicate that firms with the MBO governance structure: (1) have higher efficiency in the two years before the transaction but not prior to that; (2) have efficiency 7%, 7.5%, 4%, and 7% higher in each of the first four years post–buyout; (3) do not have superior efficiency beyond the fifth year post–buyout. This is consistent with MBOs creating managerial incentives that improve firm–level performance.

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  • Kevin Amess, 2003. "The Effect of Management Buyouts on Firm–level Technical Inefficiency: Evidence from a Panel of UK Machinery and Equipment Manufacturers," Journal of Industrial Economics, Wiley Blackwell, vol. 51(1), pages 35-44, March.
    • Handle: RePEc:bla:jindec:v:51:y:2003:i:1:p:35-44
    DOI: 10.1111/1467-6451.00190
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    2. Cumming, Douglas & Siegel, Donald S. & Wright, Mike, 2007. "Private equity, leveraged buyouts and governance," Journal of Corporate Finance, Elsevier, vol. 13(4), pages 439-460, September.
    3. Tåg, Joacim, 2010. "The Real Effects of Private Equity Buyouts," Working Paper Series 851, Research Institute of Industrial Economics.
    4. Charlie Weir & Peter Jones & Mike Wright, 2015. "Public to private transactions, private equity and financial health in the UK: an empirical analysis of the impact of going private," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 19(1), pages 91-112, February.
    5. Alperovych, Yan & Amess, Kevin & Wright, Mike, 2013. "Private equity firm experience and buyout vendor source: What is their impact on efficiency?," European Journal of Operational Research, Elsevier, vol. 228(3), pages 601-611.
    6. Martin Olsson & Joacim Tåg, 2017. "Private Equity, Layoffs, and Job Polarization," Journal of Labor Economics, University of Chicago Press, vol. 35(3), pages 697-754.
    7. Young Bong Chang & Vijay Gurbaxani, 2013. "An Empirical Analysis of Technical Efficiency: The Role of IT Intensity and Competition," Information Systems Research, INFORMS, vol. 24(3), pages 561-578, September.
    8. Michael Peneder & Gerhard Schwarz, 2007. "Die Wirkung von Private Equity und Venture Capital auf Innovation und Wachstum der Unternehmen," WIFO Studies, WIFO, number 28558, January.
    9. Miguel Meuleman & Kevin Amess & Mike Wright & Louise Scholes, 2009. "Agency, Strategic Entrepreneurship, and the Performance of Private Equity–Backed Buyouts," Entrepreneurship Theory and Practice, , vol. 33(1), pages 213-239, January.
    10. Norbäck, Pehr-Johan & Persson, Lars & Tåg, Joacim, 2010. "Buying to Sell: A Theory of Buyouts," Working Paper Series 817, Research Institute of Industrial Economics.
    11. Kevin Amess & Mike Wright, 2012. "Leveraged buyouts, private equity and jobs," Small Business Economics, Springer, vol. 38(4), pages 419-430, May.
    12. Hammer, Benjamin & Mettner, Sven & Schweizer, Denis & Wünsche, Norbert, 2023. "Management buyouts in times of economic policy uncertainty," Finance Research Letters, Elsevier, vol. 52(C).
    13. Jaroslava Rajchlová & Zdeněk Brož & Michaela Baranyková & Michal Polák, 2011. "Private equity and venture capital financing in the Czech Republic and other european countries - development, opportunities and limitations," Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis, Mendel University Press, vol. 59(7), pages 307-316.
    14. Hammond, Christopher J., 2009. "The effect of organisational change on UK public library efficiency," International Journal of Production Economics, Elsevier, vol. 121(1), pages 286-295, September.
    15. Scellato, Giuseppe & Ughetto, Elisa, 2013. "Real effects of private equity investments: Evidence from European buyouts," Journal of Business Research, Elsevier, vol. 66(12), pages 2642-2649.
    16. Amess, Kevin & Stiebale, Joel & Wright, Mike, 2015. "The impact of private equity on firms' innovation activity," DICE Discussion Papers 184, Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    17. Persson, Lars & Norbäck, Pehr-Johan & Tåg, Joacim, 2012. "Buying to Sell: Private Equity Buyouts and Industrial Restructuring," CEPR Discussion Papers 8992, C.E.P.R. Discussion Papers.
    18. A. Edward Safarian, 2011. "International Mergers and Acquisitions," Chapters, in: Miroslav N. Jovanović (ed.), International Handbook on the Economics of Integration, Volume III, chapter 6, Edward Elgar Publishing.
    19. Paul Lavery & Jose-Maria Serena & Marina-Eliza Spaliara & Serafeim Tsoukas, 2021. "Private equity buyouts, credit constraints, and firm exports," Working Papers 2021_06, Business School - Economics, University of Glasgow.

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