67 Pages Posted: 20 Feb 2011 Last revised: 1 Jul 2017
Date Written: April 10, 2013
This study uses corporate tax return data to examine the evolution of firms' financial structure and performance after leveraged buyouts (LBOs) for a comprehensive sample of 317 LBOs taking place between 1995 and 2007. We find little evidence of operating improvements subsequent to an LBO, although consistent with prior studies, we do observe operating improvements in the set of LBO firms that have public financial statements. We also find that firms do not reduce leverage after LBOs, even if they generate excess cash flow. Our results suggest that effecting a sustained change in capital structure is a conscious objective of the LBO structure.
Keywords: Leveraged Buyouts, Private Equity, Capital Structure, Corporate Governance
JEL Classification: G34, G32, H25
Suggested Citation: Suggested Citation
Cohn, Jonathan B. and Mills, Lillian F. and Towery, Erin, The Evolution of Capital Structure and Operating Performance after Leveraged Buyouts: Evidence from U.S. Corporate Tax Returns (April 10, 2013). Journal of Financial Economics (JFE), Vol. 111, 2014. Available at SSRN: https://ssrn.com/abstract=1764406 or http://dx.doi.org/10.2139/ssrn.1764406
By Chen Liu