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LBOs, Reversions and Implicit Contracts
Author(s) -
IPPOLITO RICHARD A.,
JAMES WILLIAM H.
Publication year - 1992
Publication title -
the journal of finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 18.151
H-Index - 299
eISSN - 1540-6261
pISSN - 0022-1082
DOI - 10.1111/j.1540-6261.1992.tb03981.x
Subject(s) - exploit , pension , equity (law) , leveraged buyout , control (management) , microeconomics , economics , test (biology) , theory of the firm , business , law and economics , private equity , computer science , finance , management , computer security , law , political science , paleontology , biology
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 efflciency theory are needed to structure more exacting tests.