Assessing the Impact of Management Buyouts on Economic Efficiency: Plant-Level Evidence from the United Kingdom

By Richard D. F. Harris, Donald S. Siegel, Mike Wright. Review of Economics and Statistics, 2005

334 citations recorded by the source corpus.

We assess the total factor productivity of 35,752 manufacturing establishments before and after management buyouts (MBOs). MBO plants are less productive than comparable plants before the transfer of ownership. They experience a substantial increase in productivity after a buyout, which appears to be due to measures undertaken by new owners to reduce the labor intensity of production, via outsourcing of intermediate goods and materials. These findings, which are pervasive across industries, imply that MBOs reduce agency costs and enhance economic efficiency. Our evidence is consistent with Jovanovic and Rousseau (2002), who suggest that ownership changes shift resources to more efficient uses and to better managers.

Subfields: Accounting, Economics and Econometrics

View Paper: https://www.semanticscholar.org/paper/16f63b684fe94d71a8d8d3ee2e1e001a6377b2f9

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Citations in the corpus

Private Firms and Corporate Governance: An Integrated Economic and Management Perspective (2007, methodology): “For example, Harris et al. (2005) combine the Centre for Management Buy-out Research database with the UK government s ARD plant level dataset to study productivity in management buy-out and non-management buy-out plants.”
Playing to their Strengths? Evidence that Specialization in the Private Equity Industry Confers Competitive Advantage (2007, neutral): “Wright, Thomson and Robbie, 1992; Harris, Siegel and Wright, 2005 ).”
Venture Capital and Other Private Equity: A Survey (2011, neutral): “(Harris et al. 2005) find that U.”
Assessing the Effects of Mergers and Acquisitions on Firm Performance, Plant Productivity, and Workers: New Evidence from Matched Employer-Employee Data (2010, neutral): “As a result, several authors (e.g., Lichtenberg and Siegel 1987, 1990a, 1990b; McGuckin and Nguyen, 2001; Maksimovic and Phillips, 2001; Harris, Siegel, and Wright, 2005) have asserted that a more desirable methodology is to eschew share price and profit measures and instead, assess the…”
Agency, Strategic Entrepreneurship, and the Performance of Private Equity–Backed Buyouts (2009, positive): “Since, as already noted, public to private transactions actually account for only a minority of buyouts in the US and the UK and are relatively rare in Continental Europe (Harris et al., 2005), the empirical context employed in this study considers private buyout transactions.”
The impact of corporate governance mechanisms on value increase in leveraged buyouts (2007, neutral): “Lehn & Poulsen (1989), Kaplan (1989), Smith (1990), Muscarella & Vetsuypens (1990), Cotter & Peck (2001) and Bruton et al.”
Leveraged Buyouts and Private Equity (2009, methodology): “This work includes Harris et al. (2005) for the U.K., Boucly et al. (2008) for France, and 16 Bergström et al (2007) for Sweden.”
Do private equity owners increase risk of financial distress and bankruptcy (2012, background): “Most scholars agree that PE investors create value by increasing productivity and profitability of their portfolio companies (e.g., Davis et al., 2008; Harris et al., 2005; Kaplan, 1989; Lichtenberg and Siegel, 1990, or Smith, 1990).”