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

Author

Listed:
  • John Easterwood

    (Virginia Tech., Blacksburg, VA, USA)

  • Anju Seth

    (University of Illinois at Urbana-Champaign, Champaign, IL, USA)

  • Ronald Singer

    (University of Houston, Houston, TX, USA)

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.

Suggested Citation

  • John Easterwood & Anju Seth & Ronald Singer, 1997. "Limits on managerial discretion in management buyouts: the effectiveness of institutional, market and legal mechanisms," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 18(7-8), pages 645-666.
    • Handle: 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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