The Wage and Employment Effects of Leveraged Buyouts in the UK

37 Pages Posted: 6 Dec 2007

See all articles by Kevin Amess

Kevin Amess

Nottingham University Business School

Mike Wright

Nottingham University Business School

Abstract

Using a unique hand-collected dataset, this study determines and quantifies the effects of LBOs (leveraged buyouts) on wages and employment in 1,350 LBOs. Based on an unbalanced panel 5,369 firms observed over the period 1999-2004, we find that all LBOs taken together have an insignificant effect on employment growth but have significantly lower wage growth than non-LBOs. Disaggregating LBOs we find: (1) wage growth is 0.31 of a percentage point lower for MBOs (management buyouts) and 0.97 of a percentage point lower for MBIs (management buyins), and (2) employment growth is 0.51 of a percentage point higher for MBOs and 0.81 of a percentage point lower for MBIs. The results indicate that MBOs and MBIs have a differing impact on firms' wage and employment behaviour and should not be treated as homogenous. The results are consistent with: (1) MBIs and MBOs involving the adjustment of wages to a more sustainable basis, (2) MBOs exploiting growth opportunities that lead to greater employment growth, and (3) MBIs not creating new employment opportunities.

Keywords: management buyouts, management buy-ins, employment demand, wages

JEL Classification: J23, J31, G34, L23

Suggested Citation

Amess, Kevin and Wright, Mike, The Wage and Employment Effects of Leveraged Buyouts in the UK. International Journal of the Economics of Business, Vol. 14, No. 2, 2007. Available at SSRN: https://ssrn.com/abstract=1043081

Kevin Amess (Contact Author)

Nottingham University Business School ( email )

Jubilee Campus
Wollaton Road
Nottingham, NG8 1BB
United Kingdom

HOME PAGE: http://www.nottingham.ac.uk/business/lizka1.html

Mike Wright

Nottingham University Business School ( email )

Jubilee Campus
Wollaton Road
Nottingham, NG8 1BB
United Kingdom
+44 115 951 5257 (Phone)
+44 115 951 5204 (Fax)

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