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Controlling the Conflict of Interest in Management Buyouts
John C. Easterwood, Ronald F. Singer, Anju Seth and Darla F. Lang
The Review of Economics and Statistics
Vol. 76, No. 3 (Aug., 1994), pp. 512-522
Published by: The MIT Press
Stable URL: http://www.jstor.org/stable/2109976
Page Count: 11
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A controversial aspect of the management buyouts that were popular throughout the 1980s is the potential for a conflict of interest to arise when a manager bids to acquire the firm he manages. This study examines 184 management buyouts and reports three findings. First, returns to pre-buyout shareholders are greater when managers must bid against outside acquirers. Second, bid revisions in the face of competition exceed revisions due to shareholder litigation and negotiations with boards. Third, the incidence of competition is negatively related to the pre-buyout share holdings of managers.
The Review of Economics and Statistics © 1994 The MIT Press