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

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  • Mittoo, Usha
  • Ng, Dennis
  • Yan, Meng

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.

Suggested Citation

  • Mittoo, Usha & Ng, Dennis & Yan, Meng, 2020. "Managerial ownership, credit market conditions, undervaluation and offer premiums in management (MBOs) and leveraged buyouts (LBOs)," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 65(C).
    • Handle: RePEc:eee:intfin:v:65:y:2020:i:c:s1042443120300731
    DOI: 10.1016/j.intfin.2020.101189
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    More about this item

    Keywords

    Going private; Leveraged buyouts (LBOs); Management buyouts (MBOs); Offer premiums; Ownership structure;
    All these keywords.

    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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