Illegal Buyouts

Cumming, Douglas J.; Zambelli, Simona

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Illegal Buyouts

Journal of Banking and Finance, Vol. 34, No. 2, pp. 441-456, 2010

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

There are 2 versions of this paper

Date Written: August 7, 2009

Abstract

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: 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: https://ssrn.com/abstract=1445388