Governance Effects of LBO Events

35 Pages Posted: 17 Mar 2008

See all articles by Jeffrey Oxman

Jeffrey Oxman

Syracuse University - Whitman School of Management

Yildiray Yildirim

Zicklin School of Business, Baruch College - The City University of New York

Date Written: February 11, 2008

Abstract

We examine the effects of leveraged buyouts (LBOs) on the industry rivals of the firms that undertake the LBO. Specifically, we are interested in determining whether or not the rivals that remain public take steps to change their governance mechanisms to emulate the firms that go private. Specifically, we examine CEO compensation, and the compensation and composition of the board of directors. We document an increase in the number of options awarded to CEOs following LBO activity in an industry, and a decrease in annual bonuses and restricted stock grants as LBO activity slows down. Our results also indicate the likelihood of changing the CEO is positively correlated with LBO activity. We also demonstrate significant changes in the pay for directors and the structure of the board after LBOs occur in an industry. Overall, our examination yields results that indicate firms effectuate significant corporate governance changes following an LBO event in their industry.

Keywords: LBOs, buyouts, governance, directors, compensation

JEL Classification: G30, G32, G34

Suggested Citation

Oxman, Jeffrey and Yildirim, Yildiray, Governance Effects of LBO Events (February 11, 2008). Available at SSRN: https://ssrn.com/abstract=1106706 or http://dx.doi.org/10.2139/ssrn.1106706

Jeffrey Oxman (Contact Author)

Syracuse University - Whitman School of Management ( email )

721 University Avenue
Syracuse, NY 13244-2130
United States

Yildiray Yildirim

Zicklin School of Business, Baruch College - The City University of New York ( email )

55 Lexington Ave., Box B13-260
New York, NY 10010
United States

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