TY - JOUR
T1 - The likelihood of management involvement, offer premiums, and target shareholder wealth effects
T2 - Evidence from the 2002-2007 LBO wave
AU - Cao, Kien
AU - Coy, Jeffrey
AU - Nguyen, Thuy
N1 - Publisher Copyright:
© 2015 Elsevier B.V.
PY - 2016/1/1
Y1 - 2016/1/1
N2 - This study analyzes the likelihood of management's involvement, the determinants of the offer premium and the market's reaction to the target in order to evaluate the pervasiveness of the agency cost motive and the information asymmetry motive in LBO transactions in the most recent LBO wave. In addition, we consider the role that market volatility plays in the key elements of LBOs. There is strong evidence to suggest that market volatility plays an important role in determining all three elements under investigation due to its effect on the market value of the firm. In addition, management's involvement has a strong positive effect on offer premiums indicating that positive information asymmetry remains to be a motive for management's involvement in LBOs. The agency cost hypothesis is also supported in all three analyses and there is evidence that increased financial distress costs are a concern to private equity groups.
AB - This study analyzes the likelihood of management's involvement, the determinants of the offer premium and the market's reaction to the target in order to evaluate the pervasiveness of the agency cost motive and the information asymmetry motive in LBO transactions in the most recent LBO wave. In addition, we consider the role that market volatility plays in the key elements of LBOs. There is strong evidence to suggest that market volatility plays an important role in determining all three elements under investigation due to its effect on the market value of the firm. In addition, management's involvement has a strong positive effect on offer premiums indicating that positive information asymmetry remains to be a motive for management's involvement in LBOs. The agency cost hypothesis is also supported in all three analyses and there is evidence that increased financial distress costs are a concern to private equity groups.
UR - https://www.scopus.com/pages/publications/84922124935
UR - https://www.scopus.com/inward/citedby.url?scp=84922124935&partnerID=8YFLogxK
U2 - 10.1016/j.ribaf.2015.01.002
DO - 10.1016/j.ribaf.2015.01.002
M3 - Article
AN - SCOPUS:84922124935
SN - 0275-5319
VL - 36
SP - 641
EP - 655
JO - Research in International Business and Finance
JF - Research in International Business and Finance
ER -