Illegal Buyouts

46 Pages Posted: 10 Aug 2009 Last revised: 19 Mar 2012

See all articles by Douglas J. Cumming

Douglas J. Cumming

Florida Atlantic University; Birmingham Business School; European Corporate Governance Institute (ECGI)

Simona Zambelli

University of Florence - Department of Business Economics

Multiple version iconThere are 2 versions of this paper

Date Written: August 7, 2009


This study empirically examines the effects of a regulation change on the structure and governance of leveraged buyouts (LBOs) within the Italian private equity market, whose transactions were only recently legalized. With a new data set covering approximately 85% of the buyout funds active in Italy during the period of 1999–2006, we find that a regulation that prohibits LBOs can reduce their frequency, but does not exclude them altogether. Rather, it inhibits efficient governance and distorts decision making. Overall, the data are consistent with the view that laws prohibiting LBOs result in less efficient LBO arrangements.

Keywords: Buyouts, Regulation, Governance, Law and finance

JEL Classification: G23, G24, G28, K22, K34

Suggested Citation

Cumming, Douglas J. and Zambelli, Simona, Illegal Buyouts (August 7, 2009). Journal of Banking and Finance, Vol. 34, No. 2, pp. 441-456, 2010, Available at SSRN:

Douglas J. Cumming

Florida Atlantic University ( email )

777 Glades Rd
Boca Raton, FL 33431
United States


Birmingham Business School ( email )

Edgbaston Park Road
Birmingham, B15 2TY
United Kingdom

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels

HOME PAGE: http://

Simona Zambelli (Contact Author)

University of Florence - Department of Business Economics ( email )

Via delle Pandette 9
Florence, Florence 50132

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