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Journal of Financial Economics 27 (1990) 247-262. North-Holland Consequences Krishna G. Palepu* of leveraged buyouts Harvard Business School, Boston, h4A 02163, USA Received August 1990, last-place version received December 1990 explore suggests that leveraged buyouts create abide by through significant operating mental process improvements. There is minuscular evidence that buyouts lead to widespread employee layoffs, wage reductions, or wealth transfers from bondholders. LBOs continue to be controversial, however. Future research should focus on the effect of buyouts on heartys strategic investments, buyout firms performance under sticky economic conditions, and the frequency and costs of financial distress associated with buyouts. Research can also focus on improving the performance of public corporations by examining the individual contributions of debt, management ownership, and corporate system changes to post-buyout performance. 1. Introduction A leveraged buyout (LB01 is a transaction in which a base of private investors uses debt financing to purchase a corporation or a corporate division.

Although a significant increase in financial leverage is the most obvious characteristic of LBOs, several(prenominal) other essential changes are associated with these transactions. Buyouts are structured so that managements ownership interest in the firm increases substantially. LBOs also bring about significant corporate arrangement changes - large-block equity investors join the firms board of directors and actively monitor managements strategy and performance. Another important aspect of LBOs is that their investors lose access to public equity markets aft(prenominal) the buyout. The high leverage, large management ownership, active corporate governance, and bolshy of investors *I wish to thank Michael Jensen and Richard Ruback (the editors), Karen Wruck, and the participants in the Conference on the Structure and Governance of Enterprise for helpful comments.... If you want to need a full essay, order it on our website: Orderessay

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