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Indiana University Bloomington

Department of Finance

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Research and Publications

Journal Articles

Measuring the Effect of Corporate Restructuring on Performance: The Case of Management Buyouts

1994, Review of Economics and Statistics

Scott B. Smart, Joel Waldfogel

Abstract

Recent research has attempted to document that the financial gains associated with takeovers, LBOs, and other types of restructuring are attributable to subsequent improvements in operating performance. In this paper, the authors develop a more general framework for measuring the effect of corporate restructuring on performance and apply the framework to a sample of firms taken private by their management. They demonstrate that the estimation approaches employed in the literature embody restrictions on the general framework which the data can reject. However, the authors' best estimates provide evidence that management buyouts improve corporate performance, and the magnitudes of these improvements are similar to existing estimates.

Citation

Smart, Scott B. and Joel Waldfogel (1994), "Measuring the Effect of Corporate Restructuring on Performance: The Case of Management Buyouts," Review of Economics and Statistics, Vol. 76, August, pp. 503-511.

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