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The Effect of Management Buyouts on Firm–level Technical Inefficiency: Evidence from a Panel of UK Machinery and Equipment Manufacturers
Author(s) -
Amess Kevin
Publication year - 2003
Publication title -
the journal of industrial economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.93
H-Index - 77
eISSN - 1467-6451
pISSN - 0022-1821
DOI - 10.1111/1467-6451.00190
Subject(s) - inefficiency , leveraged buyout , business , corporate governance , stochastic frontier analysis , incentive , industrial organization , production–possibility frontier , panel data , database transaction , frontier , production (economics) , finance , economics , microeconomics , private equity , econometrics , computer science , programming language , archaeology , history
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.